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Arch Coal (ACI) Rises Despite Fourth-Quarter Losses

Stocks in this article: ACI

NEW YORK (TheStreet) -- Arch Coal (ACI) increased 5.11% to $4.22 despite the fact that the coal miner reported a greater-than-expected loss in the fourth quarter.

The company reported an adjusted loss of 45 cents a share, which surpassed analysts' expectations of 39 cents a share. Arch Coal also noted that it expects to sell between 131.5 million and 142.5 million tons of coal in 2014 compared to the 139.6 million tons it sold in 2013.

Arch Coal said in its statement that rail service disruptions in the fourth-quarter slowed shipments of thermal coal, which generates electricity, from its Powder River Basin mines but did not state what caused those disruptions.

Total sales fell almost 16% in the fourth quarter compared to the third.

Weak thermal coal prices led to Arch Coal's posting a loss in its eighth consecutive quarter. Net loss grew to $371.2 million, or $1.75 a share, from $295.4 million, or $1.39 a share, from the same period one year earlier. Adjusted loss was 45 cents a share. Analysts expected a loss of 39 cents a share, according to Thomson Reuters.

Revenue dropped 17% to $719.4 million, which was below analysts' estimates of $764.44 million.

Arch Coal's stock had fallen 43% in the past 12 months through Monday's close of $4.01.

TheStreet Ratings team rates ARCH COAL INC as a "sell" with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate ARCH COAL INC (ACI) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, weak operating cash flow and generally high debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 380.6% when compared to the same quarter one year ago, falling from $45.75 million to -$128.36 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ARCH COAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ARCH COAL INC is currently extremely low, coming in at 12.96%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -16.22% is significantly below that of the industry average.
  • Net operating cash flow has decreased to $134.55 million or 48.46% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, ARCH COAL INC has marginally lower results.
  • Currently the debt-to-equity ratio of 1.97 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 2.75, which shows the ability to cover short-term cash needs.
  • You can view the full analysis from the report here: ACI Ratings Report

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