Boston, MA 04/10/2014 (wallstreetpr) – A leading coal producer, Walter Energy, Inc. (NYSE:WLT), has undergone a dreadful time on Wednesday. The key coal producing company has been downgraded by UBS AG from Neutral to Sell. The sad story equally applies to other major coal producers as well.
Wednesday had indeed been a depressing day for the major coal producing companies. Walter Energy, along with Alpha Natural Resources, Inc. (NYSE:ANR) and Arch Coal Inc (NYSE:ACI) was demoted by the UBS to Sell from Neutral. Owing to superfluous supply in the market, these companies underwent such downgrading. Coupled with excess supply of coal in the market, the below-expectation level benchmark settlement has added to the relegation of these companies. As predicted by UBS, Walter with other coal producing companies will face inferior metallurgical coal prices.
Walter Energy to experience tough time ahead
Walter Energy, Inc. (NYSE:WLT) is likely to face more depressing times in the recent future with UBS forecasting more pressure for the coal producers. The resulting lower prices will add to further stress on the already frazzled balance sheets of the companies. This indeed would be an insult to injury for the leading coal producers. The bank has also envisaged that these companies will be under tight liquidity crunch by 2016; the reason for this being their eroding cash reserves.
The coal producing companies had been facing hard days for the last couple of years. They are under pressure for operating in a market with decreasing commodity prices and depleting liquidity. However, this is not end. It seems that coal producers are going to have nightmare in the near future with declining market demand. Availability of low-cost coal substitutes will put forth a lot of rigidity on the prosperity of the coal producers.
Lower share prices for Walter
The price target for Walter Energy has been lowered by the UBS from $8 to $5.While this report was being published, Walter Energy, Inc. (NYSE:WLT) had already faced a share price down by 7%. It is time to observe whether the downgrade of met coal will further hurt the share prices of the Walter or not.
