An analyst upgraded Arch Coal Inc. and Peabody Energy Corp. Thursday, citing a better outlook for the coal sector.
Citi Investment Research analyst John H. Hill boosted his rating on the companies to "Buy" from "Hold."
"The confluence of mine disruptions, strength across the energy complex, and robust BRIC-country demand has driven coal prices to 10-year highs," he said in a note to clients.
BRIC refers to Brazil, Russia, India and China, some of the largest emerging markets countries.
A recent sell-off in the equities due to a downtick in European spot prices was "excessive," he said. Shares of both companies have fallen more than 10 percent since Monday.
"This seems profit-taking amid a deteriorating economy, and the end of the beginning, not the beginning of the end'," Hill said in a note to clients.
Hill boosted his price target on Arch to $86 from $63, implying he expects the stock to jump 38 percent above Wednesday's $62.21 close.
On Peabody, Hill's new $105 price target — up from $69 — implies he expects the shares to rise 35 percent above Wednesday's $77.90 close.