UPDATE: Stifel Initiates Coverage on Foresight Energy LP with Buy Rating, $23 PT on Positive Outlook

In a report published Monday, Stifel analyst Paul Forward initiated coverage on

with a Buy rating and $23.00 price target. In the report, Stifel noted, “We are initiating coverage on Foresight Energy LP (FELP) with a Buy rating on the units and a $23 target price. As a low-cost, single region firm in superior geology, Foresight Energy is built to grow in spite of a weak overall outlook for U.S. thermal coal, in our view. EPA regulations in recent years have had the effect of choosing winners and losers among competing U.S. coal regions; we expect the Illinois Basin to continue to gain share as a result of ongoing installations of scrubbers for sulfur control. We estimate coal production volume growth from 18.8 million tons in 2013 to 27.0 million tons in 2015, reflecting the mid-2014 completion of a second longwall system at the Sugar Camp mine and aided by utility restocking efforts. Applying a 6.0% yield on our estimated 2015 DPU level of $1.40 results in a target price of $23 per unit. We view the premium to comparable coal-related MLP yields (coal peers average 8.6% yield) as supported by our estimate of 10% distribution growth in 2016 and Foresight's longer-term prospects of volume growth driven by as many as five additional longwall mine developments.” Foresight Energy LP closed on Friday at $20.20.