Will This Downgrade Hurt Alpha Natural Resources (ANR) Today? (Update)

Update (9:42 a.m.): Updated with Thursday market open information.

NEW YORK (TheStreet) -- Jefferies lowered its target price on Alpha Natural Resources  (ANR) to $7.50 and set a "buy" rating. The firm cited a decline in domestic inventories and challenging met markets as the reasons for the decrease.

The stock was up 0.2% to $5.07 shortly after the market opened on Thursday.

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Separately, TheStreet Ratings team rates ALPHA NATURAL RESOURCES INC as a "sell" with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate ALPHA NATURAL RESOURCES INC (ANR) a SELL. This is driven by a few notable 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 unimpressive growth in net income, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

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 893.0% when compared to the same quarter one year ago, falling from -$46.15 million to -$458.24 million.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 40.60%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 885.71% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • Net operating cash flow has decreased to $111.08 million or 34.77% when compared to the same quarter last year. Despite a decrease in cash flow ALPHA NATURAL RESOURCES INC is still fairing well by exceeding its industry average cash flow growth rate of -48.26%.
  • ALPHA NATURAL RESOURCES INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ALPHA NATURAL RESOURCES INC reported poor results of -$11.06 versus -$3.25 in the prior year. This year, the market expects an improvement in earnings (-$2.29 versus -$11.06).
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ALPHA NATURAL RESOURCES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: ANR Ratings Report

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