Why Mechel Investors Got a Lump of Coal Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Russian coal miner Mechel fell as much as 10% today after the company announced fiscal-fourth-quarter earnings.

So what: Revenue fell 7% sequentially to $2.5 billion and the company lost $161 million during the quarter. This compares to a $201 million profit in the same quarter last year. Most concerning is that debt to EBITDA fell to 6.7, barely better than the 7.5 ratio needed under debt covenants.

Now what: The thermal and coking coal markets have been terrible over the past year and weaker than expected growth data out of China today doesn't help the sentiment. Mechel still has $9.1 billion of debt and in a deteriorating market I don't see more upside potential than downside risk. I'd stay far away from this stock today.

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The article Why Mechel Investors Got a Lump of Coal Today originally appeared on Fool.com.

Motley Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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