Why Arch Coal (ACI) Stock Is Down Today

Update (10:53 a.m.): Updated with Tuesday price information.

NEW YORK (TheStreet) -- Arch Coal  (ACI) declined on Tuesday after the U.S. coal miner reported first-quarter results that came up short of analysts' expectations.

Adjusted loss was 60 cents a share, which was wider than the analyst estimate of 42 cents a share, according to Thomson Reuters I/B/E/S. Net loss widened to $124.1 million, or 59 cents a share, from $70 million, or 33 cents a share, in the same period one year earlier.

Revenue was almost flat at $736 million, though this still beat the analyst estimate of $717.7 million.

Arch Coal also trimmed its shipment outlook for 2014 and now expects to ship between 6.3 million and 7.3 million tons of metallurgical coal in 2014, down from its prior estimate of 7.5 million to 8.5 million tons. Reduced met coal prices, greater supply and weaker steel demand have pressured Arch Coal and other coal producers.

The stock was down 6.04% to $4.67 at 10:53 a.m. on Tuesday.

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Separately, 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 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 disappointing return on equity, poor profit margins, weak operating cash flow, unimpressive growth in net income and generally high debt management risk."

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

  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. 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 7.08%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -51.60% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$130.85 million or 454.66% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The debt-to-equity ratio is very high at 2.29 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 2.85, which shows the ability to cover short-term cash needs.
  • The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 25.6% when compared to the same quarter one year ago, falling from -$295.42 million to -$371.21 million.
  • You can view the full analysis from the report here: ACI Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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