Walter Energy Inc.

Company Description

Walter Energy produces and exports coal for the steel industry. In addition the company supplies coal bed methane gas, industrial and steam coal, and metallurgical coke. On a side note they also have a home building and financing segment that is classified as discontinued operations.

A Surprise Profit

On Jul 22 Walter Energy reported second quarter results that included income of just over $11 million, or 21 cents per shares. This is down sharply year-over-year but crushed expectations of a 4 cent loss.

This was the company's fourth consecutive earnings surprise.

Improving Conditions

"The Company delivered a solid second quarter despite difficult market conditions," said Walter Energy Vice Chairman and Chief Financial Officer Victor P. Patrick. "Our shipments improved dramatically in June after a lull in April and May and we are now seeing signs of improvement in the global steel industry."

Surging Estimates

Given the excellent results, analysts were quick to raise forecasts. The Zacks Consensus Estimate for full-year 2009 is now $2.43, up from $1.77 prior to the report. Estimates for 2010 are averaging $5.01, up from $3.19.

While the growth for this year is expected to drop off about 41%, it should rebound sharply next year to the tune of 106%.

The Chart

I have highlighted a key level in the chart below. If this is breached a head and shoulders, bearish, formation will be prevalent. If not, it could act as support going forward.

Read the full analyst report on WLT