Instead of those cliche heart-shaped chocolates, you may want to pair that bouquet of red roses with a lump of metallurgical coal producer Alpha Natural Resources.
Though the Richmond, Va., company's fourth-quarter profit fell 40% from a year ago, analysts expect Alpha's $7.1 billion deal to buy Massey Energy (MEE) to improve the company's balance sheet and push the stock higher.
"The deal makes Alpha one of the world's top producers of metallurgical coal, and as the market gives the company credit for a much higher earnings power, Alpha's stock will do quite well," said Jefferies analyst Michael Dudas, who is looking for the shares to gain almost 50% to $80 this year.
The merger with Massey is expected to better arm Alpha to sell coal used for steelmaking in Asia, particularly China. Demand there is soaring as a budding middle class boosts demand for cars and appliances. For the year, Alpha said it expects to ship up to 14.5 million tons of metallurgical coal in 2011, an all-time high for the company.
Despite the upbeat prospects, shares of Alpha are only trading at 15.5 times estimated earnings, while shares of competitors like Peabody Energy (BTU) and Walter Energy (WLT) are trading around 20 times estimated earnings.
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