Besides that, BHP Billiton Limited (ADR) (NYSE:BHP) also sold two of its Australian coal mines due to a weak coal outlook. Its management recently announced that it has scrapped all its coal projects for FY13, and would also be looking to sell one of its coal mines in the U.S. But the company has come forth with a $1.9 billion annual cost saving plan, which altogether bolsters BHP Billiton Limited (ADR) (NYSE:BHP)’s turnaround story.
Even Peabody Energy Corporation (NYSE:BTU) has a rather higher debt/equity ratio of 126% compared to BHP Billiton’s 113%. Its long term debt aggregates to $6.14 billion, which has risen by almost 90% over the last 5 years. But Peabody Energy Corporation (NYSE:BTU) posted a net loss of $672 million last year, which offers little hope for its debt reduction. With that in mind, I don’t think its growth prospects are compelling enough to outweigh the cons.
However, CONSOL Energy operates with a relatively lower debt/equity ratio of 81%. Its long term debt stands at $3.13 billion, while its short term debt comes to just $39 million. The company also has around $2.4 billion in liquid positions.
In my opinion, CONSOL Energy Inc. (NYSE:CNX) sports a healthy balance sheet and gives little reason to worry about its long term debt. The company also has ample growth prospects, which reduces its operational risks. Hence its not hard to justify why BMO Capital Markets has and outperform rating for CONSOL Energy with a price target of $40 per share (around a 26% premium).
The article A Coal Stock That Offers Plenty of Upside originally appeared on Fool.com and is written by Piyush Arora.
Piyush Arora has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Piyush is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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