Peabody (NYSE:BTU), Alpha Natural (NYSE:ANR), CONSOL Energy (NYSE:CNX), Massey (NYSE:MEE) Should Rally on Rio (NYSE:RIO) Bid

Peabody (NYSE:BTU), Alpha Natural (NYSE:ANR), CONSOL Energy (NYSE:CNX) and Massey Energy (NYSE:MEE) are expected to rally on the bid by Rio Tinto (NYSE:RIO) for Riversdale, which has resulted in more targeted interest in the coal sector.

FBR said, "Merger mania continues and the first official bid for Riversdale came from Rio Tinto at A$16 per share in cash. We believe the market expects more bidders as the stock is trading higher. Purchase prices for met assets are skyrocketing, which increases our confidence in future CAPEX increases coming (build versus buy option). We would expect Peabody, Alpha Natural, CONSOL Energy, and Massey to rally on the takeout. The coal group has more upside potential with steam still more the value play but met coal strength is still there and improves with supply issues from the Australian rains and US MHSA safety impacts."

"Who is next? During our Australia trip to assess supply growth, we met with several companies (including Riversdale) that had impressive operations: Whitehaven Coal (ASX: WHC - A$7.00, Not Rated), New Hope Corporation Limited (ASX: NHC, A$4.95, Not Rated), and Massey Energy (NYSE: MEE, $52.33). We also note that CONSOL Energy (CNX) has met coal assets up for sale and these takeout values clearly help raise the value."

Rio Tinto was trading at $70.28, down $0.69, or 0.97 percent, at 11:54 AM EST. Peabody was trading at $63.63, up $0.05, or 0.08 percent. Alpha Natural was trading at $55.48, down $0.11, or 0.20 percent. CONSOL Energy was at $46.76, up $0.60, or 1.30 percent. Massey Energy was at $52.34, up $0.04, or 0.08 percent.