Goldman Sachs Says Coal Space Attractive

Goldman Sachs is out with a research report on the coal space, and has moved the space to Attractive from Neutral. It upgraded Patriot Coal PCX to Conviction Buy, and Peabody Energy BTU to Buy from Neutral. In the note to clients, Goldman writes, "We raise our coverage view to Attractive from Neutral. (1) We now see attractive 35% average upside for the group after recent underperformance (-13% vs. S&P 500 since May 1) on China fiscal tightening and US/global growth concerns. (2) Our outlook for international and US bituminous thermal coal is improved vs. a more cautious previous stance. We expect recent increases in thermal exports and lower production levels to persist, leading to near-normal thermal coal inventories by year's end and forcing domestic utilities to sign baseload contracts for 2012 at prices above mid-cycle. (3) We expect higher oil prices to support higher international coal prices and improved energy investor sentiment. (4) We expect stabilization and modest reacceleration of global GDP growth." Shares of PCX closed at $18.98 on Friday, while shares of BTU closed at gained 30 cents to close at $53.87.