Why Shares of Cloud Peak Energy Slumped 10% Today

By Markets Fool.com

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

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What:Shares of Cloud Peak Energy fell just a hair short of 10% today as prices for Powder River Basin coal have been falling in recent weeks.

So What: Today's 10% drop was just adding insult to injury to Cloud Peak's share price recently. Over the past year shares of Cloud Peak have lost more than two-thirds of their value as coal prices have taken a sharp turn for the worse.

CLD Chart

CLD data by YCharts

Today's pain was especially poignant because the NYMEX spot price for Powder River Basin coal -- the only region in which Cloud Peak operates -- fell below $10 per ton as natural gas prices are also low and taking power generation business away from coal. Also all futures contracts for that particular type of coal are below $10 for the rest of 2015. In its most recent earnings presentation, Cloud Peak's average cost per ton sold was $10.02, which means that the company's already razor-thin gross margins could get even thinner and possibly go into the red unless even more significant cost cutting is done.

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Now What: There are just so many things working against coal companies right now -- cheap natural gas stealing power generation market share, tighter emission regulations on power-generating facilities, and China's appetite for coal getting smaller -- it's really hard to see what will happen in the future. Investors who look at this space and say there are a few puffs left on the cigar may be right eventually, but it may take a long time for that to happen.

The article Why Shares of Cloud Peak Energy Slumped 10% Today originally appeared on Fool.com.

Tyler Crowe has no position in any stocks mentioned.You can follow him at Fool.com under the handle TMFDirtyBird, onGoogle+,or on Twitter@TylerCroweFool. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.