NEW YORK (TheStreet) -- Walter Energy (WLT) shares are down -3.6% to $7.62 in pre-market trading on Monday.
The fall follows the coal producer stock being downgraded to "sell" from "neutral" by analysts and Goldman Sachs (GS). The firm cut its price target for the company to $5 from $9.
The firm cites a pessimistic met coal pricing outlook leading to below consensus EBITDA estimates a reason for the downgraded outlook.
"We forecast WLT will burn 39% of its current market cap in free cash flow in 2014, given only $78 mn in EBITDA, but $140 mn in capex and $260 mn in interest. We see the possibility for WLT to issue a convertible bond later this year, consistent with peers, to provide additional liquidity, but believe that it could potentially significantly dilute equity holders." said analysts.
Separately, TheStreet Ratings team rates WALTER ENERGY INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate WALTER ENERGY INC (WLT) a SELL. This is driven by some concerns, 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, poor profit margins, generally disappointing historical performance in the stock itself and generally high debt management risk."