Arch Coal ( ACI) posted a 60% plunge in first-quarter earnings, missing Wall Street's expectations and cutting its full-year outlook in response.

The news sent shares down 6.5% in morning trading to $13.91.

During the quarter earnings fell to $30.6 million, or 21 cents a share, compared with $81.1 million, or 56 cents, in the same quarter last year. Analysts expected earnings of 24 cents a share.

Revenue fell 3% to $681 million from $699.4 million. The company said that in response to weak coal demand from power companies it would cut production volumes and capital spending. Arch said it was scaling back its expected U.S. output this year by an additional 4 million to 7 million tons, down from the 120 million to 127 million tons the company forecast earlier in the year.

"This further reduction in volume...eliminates virtually all of the company's unsold tonnage for 2009," Steven F. Leer, Arch's chairman and chief executive officer, said in a statement. "We believe our efforts to reduce volumes will preserve our low-cost reserve base for the future, when market conditions are expected to substantially improve."

The company now estimates 2009 earnings in the range of 20 cents to 60 cents a share.

Among coal companies, Arch is a favorite of TheStreet.com reporter Gary Morrow. On April 15, Morrow announced, "I have built a small long in the name this week and expect to add once the stock clears the March highs on a closing basis."

While Morrow says there is upside potential in Arch, as well as other coal companies like Massey Energy ( MEE) and Consol Energy ( CNX), he says it's too early to tell if they are ready to rally.
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