Jefferies & Company Reaffirms Buy on Arch Coal (ACI)

Jefferies & Company, Inc. is out with a report, where it reaffirms its “buy” rating on shares of Arch Coal ACI; it has also set a price target at $34.00. While 2Q results were in line with both consensus and Jefferies estimates, analysts believe “supply cuts, capital expenditure discipline, an eventual improvement in utility demand, and metallurgical coal pricing leverage will support a share recovery.” Arch is expected to shift sales of coal from steam to met markets as it looks to achieve higher margins and increase its product base in its Eastern business. Analysts at Jefferies noted, “Arch continues to have attractive open PRB volumes for 2011 and substantial pricing leverage for its 2012 uncommitted position.” Arch management maintains its optimistic view on domestic steam coal, which is being driven by weather, production costs, industrial demand activity, strong total exports and less impact from competing fuels. ACI began the day trading at $23.69.