Why Consol Energy Is an Expensive Coal Play
The headlines for Consol Energy's (NYSE: CNX ) recent quarterly earnings report focused on the huge ramp-up in Marcellus shale production, yet the vast majority of the company's revenue is still derived from coal. Even worse, Consol obtains more revenue from other natural gas properties outside the Marcellus shale that lack growth.
Consol Energy generated an impressive 94% production growth in the booming shale in Pennsylvania and West Virginia, but the coal operations make the stock difficult to value any higher. Even the best-run domestic coal miner, Peabody Energy (NYSE: BTU ) , trades at a substantial discount to annual sales. In that manner, investors are placing a huge premium on Marcellus shale growth to justify a market cap of nearly $11 billion for Consol Energy with forecast annual sales for 2014 of less than $4 billion, mostly obtained from coal mining.
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