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Earnings: WLT Beats After Hours - Avoid Chasing

July 28, 2008 11:30 PM

stophand.jpgWalter Industries soundly beat estimates after hours with earnings of $.94 a share. That is a huge number compared to the consensus of $.57. My first question is how ridiculous the so called well trained analysts are. If there was ANY chance of them rolling in with 57 cents a share the stock would have been halved overnight. Obviously the market knew there was almost no chance of that happening.

At any rate, there is no clarity on WLT for a variety of reasons. The chart clearly says avoid strength below $111.99 and $103.90. In addition, are these earnings likely to continue to accelerate if coal prices go flat to down? I do not know enough about their business, so I can not logically comment. However, it seems to me that long term coal (and energy prices in general) must go lower, as I have long held. Either prices fall because of a weakening economy or they fall because higher prices cause a weak economy. I see no other possible outcome. Cramer will likely be blowing his bull horn on WLT after earnings, but haven’t watched it ( I rarely ever do). But it is an avoid much higher, IMO.

In addition, I view coal as exceptionally vulnerable to alternative energy - far more than oil. This is because it is primarily used to generate electricity. Major wind generation power is coming, along with the possibility of nuclear. If the run in coal isn’t over, it likely soon will be. I would not be a long term investor in anything coal related. Wind and nuclear is likely 2-3 years out, possibly longer, but one or the other or both is coming eventually.

07/29 Close Update: Well, the size of the move surprised me. The fact that it rallied did not as the open was clearly bought. I still say extreme caution much higher near the numbers posted as that was the intent of this post to begin with. I just didn’t think it would make it near $100 in 1 day. Today’s 15% spike to $99.26 makes it appear that i am wrong on this stock. Perhaps I am. But I am leaving this view up as I still believe it is correct and I do not want to be confused with a Monday Morning QB. We will see soon enough.

Written by Tom@StockBlade.com · Filed Under WLT 

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