Ahead of the Bell: Walter Energy

Shares of Walter Energy rise in premarket trading on optimistic 1st-qtr outlook

Associated Press

NEW YORK (AP) -- Walter Energy jumped 7 percent before Friday's opening bell after reporting a strong start to the year thanks to higher prices for coal used in steelmaking and rising production.

The miner sold about 2.8 million metric tons of metallurgical coal during the first quarter, an increase of 9 percent compared with the fourth quarter. The average sale price improved slightly, while the cash cost of sales fell by more than $10 per ton, the company said.

Sales of thermal coal, used to produce power, fell about 40 percent from the fourth quarter to 380,000 metric tons in the first quarter. The lower volume raised the costs of producing a ton of thermal coal by about $35.

Brean Capital analyst Lucas Pipes said that while the performance was not surprising, there were enough investors who feared the worst. Coal companies have been under pressure because of how cheap natural gas has become.

Pipes backed his "Hold" rating and $26 fair value estimate for the stock.

Citi analyst Brian Yu said better pricing offset costs and sales that came in below his expectations. He backed his "Buy" rating and $43 price target for the stock.

Walter Energy will release first-quarter results May 2. Analysts expect the company to post a loss, excluding special items, of 86 cents per share, according to FactSet. The company lost $1.07 per share in the fourth quarter of 2012.

Shares of Walter Energy Inc. rose $1.63 to $25.75 in premarket trading.

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