Arch Coal (ACI) reported better-than-expected fourth quarter earnings of $0.56 per share, beating our EPS expectations by 44%. Strong results were associated with the early start-up and Q4 contribution from the Mountain Laurel longwall, which doubled ACI's metallurgical and PCI sales and will continue to boost margins in the region as well.
The company's market-driven strategy has paid off as prices have remained near record levels, and a significant portion of its 2008 and 2009 production is unpriced. This will allow the company to leverage their reserve base and should give them great momentum throughout 2008.
We have upgraded ACI to Buy from Hold with a twelve-month target price of $53.00 per share. We have increased our Q1 and full year 2008 estimates to $0.49 and $2.39 per share, respectively.
Read the full analyst report on ACI.
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