TSC Ratings' Updates: Eli Lilly

The following ratings changes were generated on Friday, Oct. 10.

We've downgraded Arch Coal(ACI Quote - Cramer on ACI - Stock Picks), one of the largest coal producers in the U.S., from buy to hold. The company's strengths include its compelling growth in net income, revenue growth and good cash flow from operations. However, we also find weaknesses including a decline in the stock price during the past year, generally poor debt management and poor profit margins.

Net income grew by 200.9%, from $37.55 million to $113 million, from the same quarter a year ago, significantly exceeding the S&P 500 and the oil, gas and consumable fuels industry. Revenues rose by 28%, underperforming the industry average of 32%. Return on equity has improved slightly when compared with the same quarter one year prior, exceeding the S&P 500 but underperforming the industry average.

Although Arch Coal's shares are off by a sharp 35.13% on the year, its decline was actually not as bad as the broader market plunge during that same time frame. One factor that may have helped cushion the fall somewhat was the improvement in the company's EPS over the same quarter last year. But don't assume that the stock can now be tagged as cheap and attractive. Based on its current price in relation to its earnings, Arch Coal is still more expensive than most of the other companies in its industry. Its debt-to-equity ratio of 0.77 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. The company's quick ratio of 0.33 is very low and demonstrates very weak liquidity.

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