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Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerArch Coal (NYSE: ACI) is
engaged in mining, processing, and marketing coal. The company produces about 130 million tons a year from more than 20 mines in the western US and central Appalachia. It has proven and probable reserves of about 2.9 billion tons. The low-ash coal used to fire electric utility boilers accounts for most of the firm's revenues. Arch provides the fuel for approximately 6% of the electricity generated in the United States. It also supplies steel producers and industrial facilities.
The company pleased investors last week, when it reported Q4 EPS of 56 cents and revenues of $644.4 million. Analysts had been looking for 47 cents and $641.1 million. Management also guided FY08 EPS to $2.00-$2.50, versus Street consensus of $2.43. Friedman Billings and Lehman Brothers subsequently reiterated "outperform" and "overweight" recommendations, respectively. JP Morgan upgraded the issue to "overweight". Price targets of $70-$72 were declared.
The stock
popped on the news and has since moved into a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Altogether, brokers now recommend the stock with six "strong buys", three "buys", eleven "holds" and one "underperform". Analysts see a 37% growth rate, through the next year. The ACI Price to Sales ratio (2.77) and Price to Book ratio (4.37) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 92% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $27.76 and $49.83. A stop-loss of $40.75 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold a position in the stock discussed above.
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