Arch Coal (ACI), Alpha Natural (ANR) Shares Sink as BMO's Downgrades to Underperform Weigh

Shares of Arch Coal (NYSE: ACI) and Alpha Natural Resources (NYSE: ANR) are under heavy pressure Monday morning following downgrades to Underperform by BMO Capital's Meredith Bandy. Bandy previously had a Market Perform rating on Arch Coal and an Outperform rating on Alpha Natural.

Bandy cited the two weakest balance sheets among companies in the Coal sector, as well as very low margins which could potentially create financing issues moving forward. The analyst warned closures within the Appalachia region could make servicing debt "increasingly difficult."

Bandy believes the recent bankruptcy filing by Patriot Coal (OTC: PCXCQ) could boost capital costs for the industry as a whole.

The BMO analyst said she prefers Cloud Peak Energy (NYSE: CLD), Peabody (NYSE: BTU) and/or Teck Resources (NYSE: TCK).

BMO now sees shares of Arch Coal falling to $4 over the next year, down from a prior target of $10. The analyst's price target on Alpha Natural shares fell from $18 all the way to $5.

Shares of Arch Coal are down 5.5 percent to $5.80 Monday morning, Alpha Natural shares are down 6.3 percent to $7.15.

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