UPDATE: Goldman Sachs Assumes Coverage on Arch Coal, Downgrades on Balance Sheet, Valuation, Price Outlook

In a report published Friday, Goldman Sachs analyst Neil Mehta assumed coverage on Arch Coal (NYSE: ACI), downgraded the rating from Neutral to Sell, and lowered the price target from $4.00 to $3.00.

In the report, Goldman Sachs noted, “We assume coverage of Arch Coal (ACI) at Sell, with a 6-month price target of $3, implying a -33% return vs. 7% for our coverage group. We are downgrading to Sell from Neutral given: (1) among the highest leverage ratios and lowest returns under our coverage, (2) valuations near historical peak levels, (3) a thermal outlook less bullish than consensus, as coal plant retirements and relatively low PRB pricing will likely weigh on earnings and (4) below-average earnings growth, even if met coal prices recover above our forecasts.”

Arch Coal closed on Thursday at $4.74.