UPDATE: BMO Capital Markets Downgrades Arch Coal to Underperform on High Leverage, Secular Appalachia Decline

BMO Capital Markets reduced its rating on Arch Coal ACI and lowered its price target from $10 to $4. BMO Capital Markets noted, "BMO is downgrading Arch Coal to Underperform from Market Perform based on its relatively high debt levels, deteriorating margins, and weak demand for Appalachian coal. … BMO's US$10/share NPV is also unchanged. The NPV is based on a 10% discount rate, long-run pricing of US$175/mt FOB met coal and US$72/st FOR thermal coal. BMO's US$4 target price represents 38% P/NPV and 5.7x FY2013E EV/EBITDA." Arch Coal closed at $6.14 on Friday.