Goldman analyst pours cold water on hot coal stocks

After a furious run-up, coal stocks took a hit Friday when Goldman Sachs issued a report saying coal prices are likely to fall.

U.S. coal stocks have risen 30 percent since mid-January (versus an increase of 3 percent for the Russell 3000) because of  a “perfect storm of international supply problems,” analyst Michael Molnar said in Friday’s report. That storm, or at least its effect on coal prices, is likely to blow over, he said.

“Most coal companies are trading at peak historical multiples,” Molnar wrote in the report. “Coal is abundant, and at these prices, supply will come to the market much faster than bulls may expect.”

Among the downgrades, Molnar cut Peabody Energy Corp. from “buy” to “neutral” and reduced his target price for the stock to $51. Shares of the St. Louis-based coal producer fell $1.44, or 2.5 percent, on Friday to $55.63.

Molnar cut Arch Coal Inc. shares to “sell” from “neutral,” adding the stock to Goldman’s conviction list. He cut Arch’s target price to $35 from $49. Shares of Creve Coeur-based Arch tumbled $2.17, or 4.2 percent, to $49.40 on Friday.