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Goldman Sachs Cuts Walter Energy (WLT) to Sell; Raises Arch Coal (ACI) to Neutral

April 21, 2014 6:38 AM EDT
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Price: $0.16 --0%

Rating Summary:
    1 Buy, 16 Hold, 5 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 20 | Down: 14 | New: 22
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Goldman Sachs downgraded Walter Energy (NYSE: WLT) from Neutral to Sell with a price target of $5.00 (from $9.00). Arch Coal, Inc. (NYSE: ACI) was raised to Neutral with a price target of $5.

Analyst Neil Mehta said, "We raise our PRB coal price outlook for 2015-2018, while lowering our met coal price outlook for 2014. Consistent with our more negative met view and more positive thermal price forecast, we downgrade Walter Energy (WLT) from Neutral to Sell, while upgrading Arch Coal (ACI) from Sell to Neutral."

"We lower our 6-month price target for WLT from $9 to $5, representing 37% downside vs. 4% for our coal coverage. While we recognize we are not early to this trade after sharp underperformance, three factors underpin our Sell rating: (1) our EBITDA estimates are 59%/35% below consensus for 2014/15 given our met price view; (2) we see WLT’s announced $250 mn asset sale goal as challenging; and (3) at current met prices WLT may possibly face a potential liquidity challenge in two years given negative FCF," he continued.

"We raise our rating from Sell to Neutral to reflect a more constructive PRB price outlook. Since being added to Americas Sell list on 9/26/2013, ACI returned +9% versus the S&P +10%," he added.

For an analyst ratings summary and ratings history on Walter Energy click here. For more ratings news on Walter Energy click here.

Shares of Walter Energy closed at $7.91 yesterday.



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