Why Alpha Natural Resources (ANR) Stock Hit a One-Year Low Today

NEW YORK (TheStreet) -- Shares of Alpha Natural Resources  (ANR) hit a 52-week low of $2.71 on Monday as coal stocks continue to suffer from oversupply and weak profits.

Chinese demand for coal could peak as soon as this year, Bloomberg reported. Declining renewable energy costs and stricter regulations to fight global warming would further damage coal stocks.

Last week, Goldman Sachs (GS) downgraded Peabody Energy (BTU) and reiterated its "sell" rating on Alpha Natural Resources. The firm said coal prices have not bottomed yet and believed metallurgical coal would decline even more made the following calls to suggest lower prices for coal stocks.

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The stock was down 7.72% to $2.75 at noon. More than 10 million shares had changed hands, compared to the average volume of 7,664,700.

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 several 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, weak operating cash flow, poor profit margins 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 176.1% when compared to the same quarter one year ago, falling from -$185.68 million to -$512.63 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, ALPHA NATURAL RESOURCES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$217.05 million or 10445.47% 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 gross profit margin for ALPHA NATURAL RESOURCES INC is currently extremely low, coming in at 11.12%. Regardless of ANR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, ANR's net profit margin of -48.63% significantly underperformed when compared to the industry average.
  • The debt-to-equity ratio of 1.09 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, ANR has managed to keep a strong quick ratio of 1.64, which demonstrates the ability to cover short-term cash needs.
  • You can view the full analysis from the report here: ANR Ratings Report

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