Experts: Coal prices a drag on Consol stock
By Timothy Puko
Published: Wednesday, May 8, 2013, 1:00 p.m.
On radio ads across the region, Consol Energy Inc. has sold itself as a financial adviser's dream: “diversify ... diversify ... diversify.”
It's a message that has not yet paid off on Wall Street.
The Cecil-based company's stock has festered around $35 a share for the past 12 months, down from about $50 less than two years ago, despite steady profits from becoming a successful “diversified energy company” — selling both coal and natural gas. The problem is that with coal prices low — and gas prices not doing much better — that diversity can also be a curse, analysts said on Wednesday.
“Even if they do everything right in the gas business, if coal is lagging, their stock price is going to lag, too,” said Brandon Blossman, an analyst at Tudor, Pickering, Holt & Co. in Houston. “You can easily make an argument that it should be valued higher. But the dissonance here is perhaps as much a function of where we are in the commodity cycle than on this particular company.”
CEO J. Brett Harvey spent part of the company's annual meeting on Wednesday in Findlay trying to explain that to shareholders, saying commodity prices are holding the company back. Blossman is one of several analysts who agree with Harvey on that — not only about the hurt from commodity prices — but about great strides the company has made, and that its share price could soon be on the rise.
Of 22 analysts following the company, 18 rated it as a buy, according to Bloomberg. Their average target price is about $42 a share.
Consol is trying to get attention by becoming more of a gas company, Harvey told reporters after the meeting. It's trying to sell assets — primarily its waterway shipping and pipeline transportation businesses — to help fund 121 new wells this year. Investors see coal companies as stagnant and gas companies as growth companies, he said.
“As we grow bigger into gas, I think you'll see us grow more like the gas guys,” he said, touting the fact that the company has grown in recent years despite a stagnant economy. “We're a much bigger company than we were before. And I don't think the market's realized that.”
Those efforts may not be enough to convince investors, Blossman said. The company is still primarily a coal company and selling off a few assets or drilling a few wells won't help it tip that balance from its legacy, he added.
It's good strategy nonetheless, Blossman and other analysts said. The transportation assets are not valued by investors as they should be, and the growth potential of a gas business is highly valued, said Lucas Pipes, an analyst at Brean Capital LLC in New York.
“To the extent Consol can grow its natural gas business, I think investors would appreciate that signal,” Pipes said.
The company has had earnings struggles this year, in large part because of its coal business.
Consol lost $1.6 million, or 1 cent a share, in the first three months of 2013. A fire at the Blacksville No. 2 Mine on the Pennsylvania-West Virginia border played a large role in that, halting mining and costing $15.2 million to extinguish.
A federal official said on Wednesday that mine could reopen for production as soon as next week. Consol workers finished sealing the fire-damaged areas on Tuesday, Harvey said. It will take seven days for the seals to set, Consol spokeswoman Lynn Seay said.
As soon as federal officials confirm that, they will allow Consol to reopen the mine, said Amy Louviere, spokeswoman at the Mine Safety and Health Administration.
Timothy Puko is a Trib Total Media staff writer. Reach him at 412-320-7991 or firstname.lastname@example.org.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Born in Pittsburgh, US Airways departure is a bittersweet one
- Education Management Corp. suit settled for $3.4 million
- Chobani to make Super Bowl ad debut
- Need for greater Internet speed is a boon for DQE Communications
- Massey parent Alpha Appalachia Holdings settles lawsuit for $265M
- Cecil-based Rice Energy to go public
- Sysco to buy rival US Foods in $8.2B deal
- Retailers agree to establish bill of rights for shoppers
- Stocks edge higher on Sysco acquisition
- Safety regulators look into expanding Hyundai recall
- Credit card companies offer free credit scores