Coal-mining concern Alpha Natural Resources (NYSE: ANR) is trading sharply lower today after cutting its full-year earnings and production forecasts. Due to lower coal demand from steelmakers, ANR now expects net income of $175 million to $185 million for fiscal 2008. Previously, the commodity firm predicted full-year earnings of $230 million to $270 million.
As a result of waning demand, shipments of metallurgical coal will be reduced by about 500,000 tons in the fourth quarter. Going forward, ANR stated, "the outlook for metallurgical coal sales shipments and pricing will remain uncertain until such time as the financial markets begin improving and economic activity shows tangible signs of recovery."
Additionally, Alpha said it will close its mining operations at West Virginia's Whitetail Kittanning mining complex. The company is citing "adverse geologic conditions and regulatory requirements" for the shutdown, which will occur at the end of December. A total of 329 employees will be affected by the closure.
ANR is down roughly 13% as a result of its downwardly revised guidance. The stock has been ushered lower by its 10-day and 20-day moving averages since early September, and today's drop has taken the shares within a point of their current annual low of $14.21.
In light of the company's slashed forecast and the stock's weak price action, ANR could be vulnerable to downgrades and/or price-target cuts during the short term. Zacks reports seven Strong Buys and two Buy ratings from brokerage firms, compared to just one Hold and one Sell. Meanwhile, Thomson Financial calculates the equity's average 12-month price target as $55.80, a rather lofty premium of 195% to its closing price on Tuesday.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
Why do we have a weak dollar?
Holiday hiring slow for retailers
Closing Bell: What sell-off? (AIG, ABK, EPR, MBI, JAVA, ORCL, ERTS)
