Value Play: Arch Coal (ACI)

In the last 2 days, stocks have come back to claim almost half of the value that was lost in the August correction. However, there are still some stocks out there that took such a beat-down that they still present a valuable buying opportunity. One such stock is Arch Coal (ACI).

After today's rally, shares are currently trading at $20.27 a share. Over the past 12 months, Arch Coal Inc (ACI) shares have traded between $16.91 and its 52-week high of $36.99. Arch Coal Inc shares are now trading with a P/E Ratio of 19.4 and EPS of 0.98.

Dahlman Rose & Co. analyst Daniel Scott wrote in a note to investors that the sector should see gradually increasing volumes for its products. He expects to see rising prices for thermal coal in the U.S., which is used to generate electricity. Prices for hot-burning metallurgical coal used to make steel will remain flat in 2013 after dropping from current high levels into 2012, Scott wrote:

"We see future thermal export volumes helping offset potential eastern volume declines stemming from new sulfur regulations on coal (electricity) generation facilities," Scott wrote.

Scott wrote that producers suffered from high costs, but he sees cost inflation moderating from current levels.

He released his 2013 earnings forecasts, ratings and 12-month price targets for U.S. coal producers:

-- Arch Coal Inc.: Reiterated "Buy" rating and price target of $38. Estimated earnings per share of $1.82 in 2011, $3.88 in 2012 and $4.29 in 2013.