UPDATE: Dahlman Rose Reiterates Buy Rating, Raises PT on Arch Coal

In a report published Monday, Dahlman Rose & Co. reiterated its Buy rating on Arch Coal (NYSE: ACI), and slightly raised its price target from $9.00 to $10.00.

Dahlman Rose noted, “ACI has ~$4.5 Bn of debt following the ICO acquisition, putting leverage near 60%. While the goal is to drive that down to the low 40s, tough markets may delay that. The company reworked its revolver earlier this year, lowering the amount and getting covenant relief. The term loan and unsecured bonds lack maintenance covenants, and the company believes it can manage cash and potentially leave the revolver undrawn, preventing a liquidity trap...Through the downturn, the company continues to develop the 3.5 mtpy Leer met coal longwall and to pursue an export terminal in the State of Washington. We expect the company will aggressively control capital costs next year, managing cash balances, and be positioned for a market rebound in 2014. We continue to favor the company for its low position on the cost curve and raise our price target $1/share to $10/share on an update to our model with takeaways from the trip. We reiterate our Buy rating.”

Arch Coal closed on Friday at $7.91.