UPDATE: Citi Upgrades Arch Coal to Buy

Citi is out with its report today on Arch Coal ACI, upgrading ACI to Buy. In a note to clients, Citi writes, "We are upgrading ACI to Buy/High-Risk with its shares down 23% since the announced acquisition of International Coal on May 2nd. ACI paid a full price but the resulting earnings dilution is disproportionately below the share price decline. At 8.1x our 2012 EPS estimate of $3.25, ACI shares trade near peak-cycle valuation yet 84% of its earnings still reflect trough thermal conditions, in our view." At the time of posting, shares of ACI were trading at $26.62, up 0.45% from Friday's close.