J.P. Morgan Maintains Current ACI Estimates

Arch Coal, Inc. ACI blames rail service and geological problems at its Mt laurel mine for the need to guide earnings guidance down for Q4 and calendar 2010, J.P. Morgan reports. “Additionally, the need to reestablish the longwall mine means that production of this lower grade coking coal product will be much reduced in Q1 2011,” J.P. Morgan writes. “The company is hoping to supply existing contracts from inventories and the continuous miners that are establishing the tunnels required for the new longwall layout. It's difficult to know the impact on earnings in Q1 2011. “Without inventory sales, first quarter earnings could be halved, but perhaps the impact would be on the order of 15% to 25% on our current $0.63 earnings forecast. Perhaps with few alternative supplies of coking coal, prices will remain strong in the rest of the year when Arch is planning to produce a record seven million tons of various grades of coking coal, including PCI coal. “We are maintaining our current estimates as we await further detail from the company.” Arch Coal currently trades at $34.68.