UPDATE: Stifel Starts Arch Coal (ARCH) at Buy
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(Updated - October 10, 2016 9:06 AM EDT)
Stifel initiated coverage on Arch Coal (NYSE: ARCH) with a Buy rating and a price target of $81. The company emerged from bankruptcy on October 5th.
"We covered Arch’s predecessor firm from 2003 to 2015 and view the firm as emerging with an asset base that is largely intact. The bankruptcy process reduced Arch's debt load from $5.15 billion to just $363 million," said analyst Paul S. Forward.
The analyst continued, "Arch emerges from bankruptcy at a time of sharply higher pricing for most types of coal, both in the international and domestic markets. The decline in production among most competing U.S. producers of metallurgical coal has left Arch as the largest producer, with an estimated 7.0-7.5 million tons of production in 2017 (12% of our estimate of U.S. met coal production in 2017 of 60 million tons). Arch is also the second-largest producer of thermal coal in the U.S., with an estimated 107 million tons, representing 15% of the U.S. supply."
Forward added, "The improvement we estimate for 2017 EBITDA vs. depressed 2014-2016 levels primarily reflects stronger metallurgical coal markets, but price trends are favorable in thermal coal as well. Our projected 2017 EBITDA margin for Arch is 17.5%, in line with the firm’s average reported adjusted EBITDA margin of 17.3% since 1997."
Shares of Arch Coal closed at $61.70 yesterday.
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