Shares of most coal producers rose Friday morning, after a positive analyst rating of the sector, but they could not hold their gains and fell with the broader market as the day wore on.
Goldman Sachs analyst Michael Molnar said the amount of coal available to the market could fall 8.4 million tons in 2008, subsequently raising earnings and share prices. He upgraded his sector view to "Neutral" from "Cautious."
"We are not more bullish because we believe industry valuations already imply strong earnings growth," Molnar said in a client note.
Exports this year should slowly grow, and production should increase by 1 percent, he said, boosting international opportunities.
The analyst named Consol Energy Inc. as coal investors' best option. He placed the company on his list of preferred stocks and raised his price target to $90 from $53, citing forecast growth in the international market and better prices for its gas business.
Consol's shares led the sector down in late-morning trading, though, falling $2.89, or 4.2 percent, to $66.42 as the broader market grappled with disappointing employment news. By midday, the Standard & Poor 500 index was down about 1.6 percent.
Alpha Natural Resources Inc. received Molnar's only downgrade in the sector, moving to "Sell" from "Neutral." Its shares lost $1.09, or 3.5 percent, to $30.19.
Arch Coal Inc. shed 56 cents to $42.55. It was upgraded to "Neutral" from "Sell," as was Foundation Coal Holdings Inc., which lost 5 cents to $53.17.
And Peabody Energy Corp. dropped 43 cents to $59.56, despite Molnar's upgrade to "Buy" from "Neutral."
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