NEW YORK (TheStreet) -- Shares of Alpha Natural Resources (ANR) closed lower by 4.23% to $1.36 on Monday after Argus downgraded peer coal company Arch Coal (ACI) to "sell" from "buy" and said it would cease analyst coverage on Arch Coal.
The downgrade led other coal stocks, including Alpha Natural Resources and Peabody Energy (BTU) , lower on Monday.
The firm said it downgraded Arch Coal because it expects continued losses in the future for the coal company.
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Argus also said in the research note that it continually reviews the stocks it covers in order to properly research those that could be most the promising to the firm's analysts and that generate the most interest among the firm's clients. Arch Coal, it said, no longer fits those standards.
Earlier this month, Alpha Natural Resources reported a fourth-quarter loss of 50 cents a share on revenue that declined 2.1% to $1.07 billion. Analysts had expected a loss of 71 cents a share on revenue of $981.7 million.
Alpha Natural Resources announced metallurgical coal shipments of 4.9 million tons in the fourth quarter, compared to 4.4 million in the same period one year earlier and 4.8 million tons in the third quarter.
The company also said it expects to ship between 69 million and 80 million tons of coal in 2015, including 14 million to 17 million tons of Eastern metallurgical coal, 19 million to 23 million tons of Eastern steam coal, and 36 million to 40 million tons of Western steam coal.
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 number of negative factors, 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, generally disappointing historical performance in the stock itself and generally high debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. 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.
- The gross profit margin for ALPHA NATURAL RESOURCES INC is currently extremely low, coming in at 12.93%. 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 -11.36% significantly underperformed when compared to the industry average.
- ANR's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 73.15%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
- The debt-to-equity ratio of 1.31 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, ANR's quick ratio is somewhat strong at 1.47, demonstrating the ability to handle short-term liquidity needs.
- Despite the weak revenue results, ANR has outperformed against the industry average of 20.1%. Since the same quarter one year prior, revenues slightly dropped by 2.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: ANR Ratings Report