Sector Snap: Coal stocks tumble

The Energy Information Administration said Friday that total U.S. coal production fell by 700,000 tons, or 3 percent, to 22.6 million tons for the week ended Sept. 20. Production still remains above the 22.2 million tons produced for the week ended Sept. 22, 2007.

Meanwhile, light, sweet crude for November delivery fell $2.76 to $105.26 on the New York Mercantile Exchange. Shares of coal companies tend to trade in tandem with crude prices, since as oil becomes cheaper there is less demand for other sources of energy.

But Citi Investment Research analyst John H. Hill said coal stocks--which have slid in recent months--may be poised for a rebound and create an investment opportunity.

"We believe coal equities have corrected excessively relative to the underlying commodity, far beyond steel where prices are at the early stage of a likely extended decline," Hill said in a note to clients.

He upgraded Consol Energy Inc. to "Buy" from "Hold," saying in part the strength of its Northern Appalachian coal franchise does not appear to be reflected in the stock.

Shares of Consol fell $2.89, or 5.6 percent, to $48.36.

Hill kept a "Buy" rating on Peabody Energy Corp., whose shares fell $3.44, or 6.9 percent, to $46.74.

Shares of Arch Coal Inc. tumbled $3.20, or 8.5 percent, to $34.46, and shares of Foundation Coal Holdings Inc. lost $2.68, or 6.9 percent, to $36.33.

UBS Investment Research analyst Shneur Z. Gershuni upgraded Alpha Natural Resources Inc. to "Buy" from "Neutral," citing valuation.