Peabody Energy Corporation (BTU), Cloud Peak Energy Inc. (CLD): Pinpoint Your Coal Exposure With These Stocks

Although growth rates are likely to slow from their heady pace over the past decade or so, slow but steady demand for steel — and thus met coal — is BHP’s expectation once supply and demand stabilize. Steel giant ArcelorMittal (ADR) (NYSE:MT) backs that up, noting in its 2012 annual report that overall steel demand is already back above pre-recession levels but that demand in developed markets isn’t expected to regain those heights until late this decade. Emerging markets are clearly the driving force, but slow and steady is likely to be a worldwide phenomena.

So, Walter Energy, Inc. (NYSE:WLT) is a struggling company today, but it has notable turnaround potential once met coal markets right themselves. Unlike the U.S. electric market, however, the foundation for that turnaround doesn’t yet appear to be taking place. And Walter’s long-term debt accounts for nearly 75% of its capital structure, so it isn’t a low-risk investment.

All of the above?
For investors looking to hone in on key coal end markets, Cloud Peak Energy Inc. (NYSE:CLD) and Walter Energy, Inc. (NYSE:WLT) are two options to consider. More conservative investors, however, should probably stick to a diversified giant like Peabody Energy Corporation (NYSE:BTU). It has exposure to electric and steel markets throughout the world.

Although 2013 is going to be a tough year for the company, just like it will be for the other pair, 2014 should be much better. And improving U.S. demand from electric utilities should help support the company’s met coal operations which are likely to take longer to recover. That said, Cloud Peak Energy Inc. (NYSE:CLD) is likely to see a bigger boost to its business from improved U.S. demand.

The article Pinpoint Your Coal Exposure With These Stocks originally appeared on Fool.com.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 

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