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Rising Energy Costs Help Foundation Coal Shares Grow By 8.4%

Posted on: Monday, 15 August 2005, 21:00 CDT

Maryland stocks treaded water while broader indexes sunk or swam last week.

The Bloomberg Maryland index held even. Shares on the Nasdaq Composite shed 1 percent during the week, and the Dow Jones Industrial Average gained 0.4 percent.

Record high oil prices last week greased the declines for many stocks, according to analysts at Baltimore's T. Rowe Price Group Inc. Oil prices reached $66.86 per barrel Friday, marking the second straight day of record highs.

But what translates to higher transportation, heating and production costs for some businesses is sweet music for other industries.

Shares in Foundation Coal Holdings Inc. grew by 8.4 percent this week to close at $35.25 Friday. The Linthicum Heights firm mines coal in Central Appalachia, Northern Appalachia, the Powder River Basin and the Illinois Basin.

Coal isn't oil, but it's close enough for traders. The stock rallied with higher oil prices at the end of last week.

That's more people getting excited about the broader commodity story and the potential for commodities staying at a higher level, said analyst Ian Synnott of Natexis Bleichroeder Inc. in New York.

Coal prices have mimicked the price trends of oil in the past year. But Synnott said companies like Foundation Coal had other catalysts for stock growth last week. A heat wave has meant higher energy bills for individuals trying to keep cool. About 90 percent of Foundation's coal is used to produce electricity. And the company is one of several that could benefit from federal energy legislation signed into law last week that provided incentives to build cleaner coal plants and for installing pollution reduction equipment at old plants.

Synnott said both measures could increase demand for Foundation Coal's reserves.

But shareholders in Foundation Coal weren't the only investors to hear sweet tunes last week.

Stock in Optelecom-NKF Inc. increased 20.4 percent during the week to close at $12.15 Friday. Quarterly earnings fueled heavy trading in stock. The Germantown company makes equipment to send video, audio and other data over the Internet. It is a player in the field of surveillance and identification technology, including the use of biological markers to identify individuals. It bought NKF Electronics earlier this year to expand sales in Europe.

The company posted record revenues of $9 million for its second quarter - a 111 percent increase over last year's comparable three- month period. Net income grew 61 percent to $488,000.

Meanwhile, Digene Corp. faced the music from investors who hoped for a more exciting quarterly report and earnings projections.

The Gaithersburg maker of cervical cancer tests reported record revenue as sales of its chief cancer product grew. Revenue for the cancer test grew 25 percent to $27.6 million during its fourth fiscal quarter. But the results only matched earlier projections.

After a June analyst meeting where Digene said a pilot marketing program for the cancer test had increased sales in test markets, some investors had expected the company to beat earnings estimates.

Also Wall Street had estimated Digene would project 2006 fiscal revenue of closer to $150 million. Instead, executives placed the goal at $145 million.

I thought the quarter was pretty solid. But I think there were perhaps some inflated expectations leading into the quarter, said analyst Bruce Cranna of Leerink Swann in Boston.

Kathleen Johnston Jarboe covers finance for The Daily Record.

Source: The Daily Record (Baltimore)

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