Dahlman Rose Comments On Alpha Natural Resources Tough Quarter

Alpha Natural Resources ANR reported $216MM in adjusted 1Q11 EBITDA versus consensus of $255MM and $223MM in the year-ago period. Both tons sold and cash costs came in significantly worse than anticipated. Eastern steam coal sales were 4.9MM tons versus Dahlman's forecast of 6.1MM due mainly to challenges at the Emerald and Cumberland longwall mines. Costs were also sharply higher than Dahlman's $63/ton estimate at $71/ton. In addition to the lower tonnage, higher wage expense, sales sensitive costs, and raw material prices were behind the increase. The Alpha/Massey merger remains on track to close immediately following the June 1 shareholder votes of both companies, and yesterday Alpha management expressed its confidence in achieving higher synergies than the $150MM originally forecast. The combined entity is expected to produce 28-30MM tons of met in 2013 and have 25MM tons of total annual export capacity. Dahlman Rose is adjusting its earnings estimates and reiterating a Buy rating and $73/share price target on ANR shares. ANR closed Tuesday at $57.57