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Buy Suncoke Energy (SXC) Shares At Current Levels: Brean Capital

 February 06, 2013 02:08 PM

(By Balaseshan) Brean Capital analyst Lucas Pipes recommends investors buy shares of SunCoke Energy Inc. (NYSE: SXC) at current levels, following the independent coke producer's upbeat fourth quarter results.

On Tuesday, SunCoke reported a Q4 beat with EPS of $0.39 versus Street estimates of $0.34, the analyst noted. The company also reported Q4 EBITDA of $70 million, above consensus estimates of $64 million.

Pipes said the beat was driven by a strong performance by the company's Domestic Coke segment. On the other hand, the company experienced continued weakness in its coal mining segment and performed poorly in its Jewel Coke segment (which was weather related).

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Looking ahead, SunCoke reiterated its volume and financial guidance, previously provided at its December 2012 Investor Day, the analyst noted. Additionally, the company discussed potential M&A activity, especially those which may be included in the MLP SunCoke Energy Partners.

SunCoke stated that it was now in talks with various by-product coke oven owners and actively pursuing this possibility, Pipes noted. On the company's coal segment, SunCoke reiterated its commitment to control costs and described the segment as a "core" part of the company.

SunCoke sees its coal assets being full competitive. The analyst believes better performance there could potentially be a catalyst for the stock, as much of the company's operational overhang continues to rest on a poor outlook and valuation of this segment due to persistently high costs and a muted met coal market outlook.

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Finally, the company reported continued diligence on the pursuit of permits for the potential Kentucky cokemaking facility, as well as the contract renewal and refurbishment of the Indiana Harbor facility, Pipes noted. Net net, the company reported a solid quarter.

SXC is trading up 0.77% at $16.91 on Wednesday.

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