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| Arch Coal (ACI): All fired up |
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| Monday, 28 April 2008 | |
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And with 13.5 million shares of the stock sold short, the analyst with Schaeffer's Research explains, "Shorts account for about 9.5% of the stock's float, which could result in a short squeeze." Here is his review. "Net income nearly tripled to $81.1 million, or 56 cents per share. Revenue for the auarter rose to $699.4 million from $571.3 million. For the year, Arch Coal lifted its earnings estimate to a range of $2.40 to $2.80 per share, versus Wall Street's consensus view for $2.43 per share. "Digging into the report, the company noted that profit margins were particularly wide in the Central Appalachia region, while higher prices for coal and cost controls also contributed to the results. Arch noted that the average sales price per ton rose 9.7% to $18.49 from $16.85, while the cash cost per ton rose less than 1% to $13.05 from $12.93. "Shares of Arch Coal soared on the news. Technically speaking, ACI is now trading in all-time high territory after taking out potential round-number resistance in the 60 region. Look for this region to provide support for the equity in the event of a consolidation period following the company's blow-out earnings. "The coal sector has been on fire this year, and ACI is no laggard on this front. On a year-to-date basis, the equity has rallied more than 29%, extending its 52-week gain to more than 65%. "From this long-term perspective, the security continues to power higher along its 10-week and 20-week moving averages. ACI has closed only 2 weeks below this duo since September 2007. "Currently, roughly 13.5 million ACI shares are sold short, accounting for about 9.5% of the stock's total float. The recent jump in the stock could be at least partly influenced by short sellers diving into the market to rescue their portfolios. "What's more, a continued advance from the equity would only provide more pain for these bearish investors. As such, an unwinding of these short positions could results in additional buying pressure being applied to ACI, helping to push the stock even higher. "Finally, analysts have been loath join the bullish ACI bandwagon. According to Zacks.com, 10 of the 15 analysts following the stock rate it a 'hold' or worse. "Still, there is evidence that a shift may be in the cards, as Raymond James upgraded ACI to 'outperform' from 'market perform.' Should more brokerage firms join Raymond James, the ensuing upgrades could be extremely beneficial to ACI shares." |
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