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Nomura Securities Cuts PT on Arch Coal (ACI) Post Q4; Sees Headwinds

February 6, 2013 8:48 AM EST Send to a Friend
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Price: $2.44 -7.58%

Rating Summary:
    11 Buy, 13 Hold, 7 Sell

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Today's Overall Ratings:
    Up: 21 | Down: 25 | New: 14
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Nomura Securities adjusted estimates and cuts its price target Arch Coal Inc (NYSE: ACI) from $6 to $5 following Q4 results.

Analyst Curt Woodworth comments, "High leverage and long path for PRB recovery are risks. We believe Arch Coal is facing difficult headwinds in 2013 owing to a weak contract position in PRB and challenging markets for lower-quality coking coals in Appalachia. Given continued weak fundamentals, we are moderately reducing ASP and volume targets and now forecast 2013 EBITDA of $425mm and 2014 EBITDA of $558mm, ~25% below the Street. We find the stock expensive trading at 12.7x 2013E EV/EBITDA and 9.6x 2014E EV/EBITDA. Our revised $5 price target assumes ACI trades at 7.2x our mid-cycle EBITDA forecast of $714mm, our projection for 2015. PRB vintage issue remains a risk into 2014 and potentially 2015. The main lever to grow EBITDA in 2014 will be via higher met ASPs on volumes near 10mt in 2014, which we model at $105/ton vs. $94/ton in 2013. FY13E EPS from ($1.5) to ($1.35); FY14E EPS from ($1.2) to ($1.05)."


For an analyst ratings summary and ratings history on Arch Coal Inc click here. For more ratings news on Arch Coal Inc click here.

Shares of Arch Coal Inc closed at $6.04 yesterday.




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