We reiterate our Neutral recommendation on Arch Coal
Inc. ( ACI
). The large-scale coal production company currently carries a
Zacks Rank #3 (Hold).
Why the Reiteration?
Arch Coal reported uninspiring financial results in fourth
quarter 2012, with both the top and the bottom line significantly
lagging the Zacks Consensus Estimates. Plummeting sales volume plus
a rise in operating expenses contributed to the overall
However, we believe increased thermal as well as metallurgical
coal usage in the emerging economies of India and China would be
favorable to the demand for coal and thereby Arch Coal's
profitability. The company's Western Bituminous and Appalachia
plays are expected to act as the key providers of high-quality coal
in the near term.
Several low-cost domestic operations of Arch Coal, like the
Leer, Skyline and Mount Laurel mines are also likely to fetch
substantial returns, going forward. Its sound financial position
will help the company overcome domestic coal market challenges.
Moreover, Arch Coal's five-year average dividend yield of 1.80% is
well above the industry average, and will encourage investor
Then again, continued switch in coal-to-natural gas in the U.S.,
and regulatory pressure could deter growth opportunities. The Zacks
Consensus Estimate for the first quarter of 2013 is pegged at a
loss of 32 cents per share.
Other Stocks to Consider
Other stocks performing better and worth a look include Zacks
Ranked #2 (Buy) DTE Energy Company ( DTE ), Vectren
Corporation ( VVC ) and Atmos
Energy Corporation ( ATO ).ARCH COAL INC (ACI): Free Stock Analysis ReportATMOS ENERGY CP (ATO): Free Stock Analysis
ReportDTE ENERGY CO (DTE): Free Stock Analysis ReportVECTREN CORP (VVC): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment