Cloud Peak Energy Inc. (CLD), Peabody Energy Corporation (BTU), Alliance Resource Partners, L.P. (ARLP): 3 Coal Miners Square Off With Natural Gas

That increase allowed the company to post record sales despite the year over year drop in coal prices. Management noted in the second quarter earnings release that, “The strong performance of our Illinois Basin operations through the first half of 2013 is expected to continue over the balance of the year.” So, 2013 should be a record year for the company.

While other coal miners have struggled, Alliance Resource Partners, L.P. (NASDAQ:ARLP) has been a star performer. Although this limits capital appreciation potential, since the units have rebounded from their lows, you still might find the around 5.9% yield, regular distribution hikes, and at least modest capital appreciation potential appealing.

How about both?
Another name to consider is Arch Coal Inc (NYSE:ACI). Over 60% of Arch’s reserves are located in the PRB, making it the number two player in the region. Another 13% of its reserves are in the ILB. That puts the miner is good position to benefit as utilities switch to replenishing their stockpiles.

And the early signs of a turnaround are taking shape at Arch Coal Inc (NYSE:ACI). It sold nearly 25% more tons of coal in the second quarter of 2013 than it did in the second quarter of 2012. That said, an 8% price drop per ton is a big hurdle to overcome since operating mines is an expensive proposition. While 2013 should be a tough year, 2014 could see this PRB and ILB player’s performance and stock price get back on track.

Watching for the turn
Additional evidence of a turn comes from rail company CSX Corporation (NYSE:CSX), whose operations touch the ILB region. It saw a 3% increase in domestic coal shipments in the second quarter. The company believes overall coal volumes will drop by a third this year, so a 3% uptick isn’t much, but it does hint at the beginning of a turnaround for domestic miners, particularly those with operations in the PRB and ILB.

That will be good news for Cloud Peak Energy Inc. (NYSE:CLD), Arch, and Alliance Resource Partners, L.P. (NASDAQ:ARLP). It also means that CSX Corporation (NYSE:CSX) could start to see notably improved domestic coal volumes next year. That would be a big boost to the company’s results since coal accounts for nearly 15% of its shipping volume.

The article 3 Coal Miners Square Off With Natural Gas originally appeared on Fool.com and is written by Reuben Brewer.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Alliance Resource Partners, L.P.. The Motley Fool owns shares of CSX.

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