Arch 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.

TheStreet.com's Jim Cramer explains why the unique dynamic of oil as a commodity gives alternative fuels a "magic" price point.

Boy, that ethanol is cheap. It's cheap if we use corn, and it is even cheaper if we use soy. It doesn't matter how much it costs or how much infrastructure is needed, it's become the low-cost gasoline even with the stupid unnecessary subsidies.

Amazing, isn't it? But that's why Monsanto (NYSE: MON) (Cramer's Take) and Bunge (NYSE: BG) (Cramer's Take) are so cheap and why all of the various "sun" stocks are inexpensive. Oil at $92, going to who knows where, is going to make all of these unnaturally natural alternatives the low-cost fuels.

There are a lot of fuels that are cheaper to produce than oil now, particularly if you read Chris Edmond's unbelievably good series out of the Middle East. It's all demand-on-fire, supply disappearing that is controlling the price. It isn't Nigerian terrorism or Iranian intransigence or Iraqi-Turk tensions.

Those are all just headline terms by writers searching for a reason to write about oil jumping. They have no choice. They can't keep writing "because supply is outstripped by demand," even though that's what is happening.

In a sense, we have a fabulous opportunity as a country to make some headway here on domestic security because of this umbrella. Even coal, which will now never amount to much given the Democrats' desire to stop global warming, becomes too viable to ignore as the rallies in Peabody Energy (NYSE: BTU) (Cramer's Take) and Arch Coal (NYSE: ACI) (Cramer's Take) show.

So, the endless moves up will continue. I have never seen a commodity that has no price at which demand tapers. So anything with a price point of $80 or less is now a go.

Including all crops that will burn.

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RELATED LINKS:

The Five Dumbest Things on Wall Street This Week

The 'Hannah Montana' Stock Index

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in stocks mentioned.

MOST NOTEWORTHY: Papa John's (PZZA), Wynn Resorts (WYNN), SourceForge (LNUX), Cathay Pacific (CPCAY) and Arthur J. Gallagher (AJG) were today's noteworthy downgrades:

• Matrix downgraded shares of Papa John's (NASDAQ: PZZA) to Hold from Strong Buy to reflect minimal improvement to fundamentals and negative free cash flow trends.

• Wynn Resorts (NASDAQ: WYNN) was downgraded to Peer Perform from Outperform based on valuation as the firm believes shares fully reflect solid Las Vegas & Macau fundamentals and the company's development pipeline.

• SourceForge (NASDAQ: LNUX) was cut to Underperform from Market perform at JMP Securities, with a $3 target, following the disappointing results.

• Merrill Lynch downgraded Cathay Pacific (OTC: CPCAY) to Sell from Buy on valuation.

• Arthur J. Gallagher (NYSE: AJG) was cut to Underperform from Peer Perform at Bear Stearns as they believe margin expansion will be lower than expected, softening insurance pricing will impact organic growth, and cites managements acquisition desires over aggressive repurchases...

OTHER DOWNGRADES:

• PolyMedica (NASDAQ: PLMD) was downgraded to Hold from Buy.

• Merrill downgraded Polo Ralph Lauren (NYSE: RL) to Neutral from Buy.

• Morgan Stanley cut Arch Coal (NYSE: ACI) to Underwieght from Overweight.

• JP Morgan downgraded Sonic (NASDAQ: SONC) to Neutral from Overweight.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

MOST NOTEWORTHY: Novartis AG (NVS), Intel (INTC), Total S.A. (TOT), Syniverse Holdings, Inc (SVR) and Kindred Healthcare (KND) were today's noteworthy downgrades:

• Merrill cut Novartis (NYSE: NVS) to Neutral from Buy based on a lack of near-term catalysts. Credit Suisse downgraded shares of the company to Underperform from Neutral on expectations of slowing sales growth in 2H07.

• JMP Securities downgraded Intel (NASDAQ: INTC) to Market Perform from Outperform based on valuation and lower estimates.

• JP Morgan cut Total S.A. (NYSE: TOT) to Neutral from Overweight on valuation.

• Syniverse (NYSE: SVR) was cut to Strong Sell from Sell at Matrix USA as competition in North America is creating a cut in Network Services and Number Portability Services revenue.

• Kindred Healthcare (NYSE: KND) was cut to Underperform from Market Perform at Wachovia based on valuation...

OTHER DOWNGRADES:

• DaVita (NYSE: DVA) was downgraded to Hold from Buy at Deutsche Bank.

• Citigroup downgraded the coal sector, including Arch Coal (NYSE: ACI), Peabody Energy (NYSE: BTU) and Foundation Coal (NYSE: FCL) to Hold from Buy.

• Credit Suisse downgraded ACA Capital Holdings (NYSE: ACA) to Neutral from Outperform.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Tonight on CNBC's Mad Money, Jim Cramer said that recent pushes out of Democrats are now backing new coal initiatives for converting coal to fuel. His first two coal producers in the sector are Arch Coal Inc. (NYSE:ACI) and CONSOL Energy Inc. (NYSE:CNX). Arch Coal is riskier because its coal is somewhat uncommitted in 2008 and 2009. Cramer did say that CONSOL could even try to covert to a Master Limited partnership. But Cramer's favorite coal stock is Peabody Energy Corp. (NYSE:BTU). He likes where it is placed and he thinks coal will rise to catch up to oil as far as gains. Peabody can sell to China and India and it's down over $9.00 from its highs. The company is also going to spin off its Appalachian assets to focus on growth, and that will take the stock higher when it occurs. He thinks it has 41 years of production in reserves.

The sad thing is that coal is something we are stuck with. I know coal is filthy and it contributes to global warming or whatever the powers that be want us to call it now. Yet I also know that it is perhaps the cheapest form of energy and that even if the U.S. went 100% to clean coal, China, India, and many other nations have very little chance of getting around the use of coal. The buildouts for power plants and for power-generating facilities in so many parts of the world will just take too long to build and there are too many very new "clean" or "cleaner" coal power plants in the US that will be operating for many years into the future. The gasification of coal is also something that can theoretically be done as an alternative energy as well, so like it or not it's probably a safe bet that we are stuck with coal for a long time to come.

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

MOST NOTEWORTHY: The more noteworthy downgrades today included eFunds Corp (EFD), Halliburton Co (HAL), Coventry Health Care, Inc (CVH), Fording Canadian Coal Trust (FDG) and US Steel Corp (X):

• Citigroup downgraded shares of eFunds Corp (NYSE: EFD) to Sell from Hold to reflect an unfavorable risk/reward as they see little upside if the company sells itself and significant downside due to recent operational issues if the company is not sold.

• Goldman cut Halliburton Co (NYSE: HAL) to Neutral from Buy based on valuation.

• Bear Stearns cut Coventry Health (NYSE: CVH) to Peer Perform from Outperform based on valuation.

• BMO Capital downgraded Fording Canadian Coal Trust (NYSE: CFG) to Underperform from Market Perform on valuation...

• UBS cut US Steel Group (NYSE: X) to Reduce from Neutral based on valuation.
  

OTHER DOWNGRADES:

• Goldman downgraded the coal sector, citing the potential for fundamentals to disappoint. The firm downgraded Arch Coal (NYSE: ACI) to Sell from Buy, Foundation Coal Holdings (NYSE: FCL) to Sell from Neutral, and Alpha Natural Resources (NYSE: ANR) to Neutral from Buy.

• Matrix cut CBRL Group (NASDAQ: CBRL) to Sell from Hold.

• CE Unterberg downgraded Atheros Communications (NASDAQ: ATHR) to Market Perform from Buy.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

MOST NOTEWORTHY:

• General Dynamics Corp. (NYSE:GD) was the only noteworthy company initiated today; Caris initiated the military equipment-maker with an Average rating based on valuation.

OTHER INITIATIONS:

• Merriman initiated Bankrate Inc. (NASDAQ:RATE) with a Buy rating; the firm said Bankrate has a number of attractive assets and competitive strengths that include a high level of direct-to-site traffic, high quality traffic, pricing leverage and strong management.
• Deutsche Bank started Color Kinetics Inc. (NASDAQ:CLRK) with a Buy rating and $23 target, as it believes Color Kinetics is an attractive play on the rapid adoption of LEDs.
• HSBC initiated Peabody Energy Corp. (NYSE:BTU) and Arch Coal Inc. (NYSE:ACI) with Overweight ratings.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Jim Cramer on today's STOP TRADING segment violated his show's title: he essentially said KEEP TRADING.

Last night he was calling for a "mom-back," essentially a "back up the truck and buy" bias on the entire market. He has been positive, particularly, on techs and drug stocks, as they lead the market higher.

He said it is the most "stealth bull market" he has seen. May 11 was essentially the peak of oil, said Cramer, and it is now bouncing and may go lower. He thinks oil stocks have been trying to find a bottom, and says the market rally has legs.

As for analyst earnings estimates? Too low.

Arch Coal, Inc. (NYSE:ACI) is one that is too far off and he has noted it as a possibility as a buyout target for a big oil company down the road. He also noted Massey Energy Company (NYSE:MEE) might be a target.

Jon Ogg is a partner in 24/7 Wall St.; he does not own securities in the companies he covers.