FBR Capital Releases a Buy Rating on Peabody Energy Corp

By Carrie Williams

FBR Capital analyst Lucas Pipes reiterated a Buy rating on Peabody Energy Corp (NYSE: BTUUQ) yesterday and set a price target of $34. The company’s shares closed last Monday at $0.38.

Pipes commented:

“On April 17, Peabody Energy announced that it would retain the Metropolitan met coal mine in New South Wales and its associated interest in the Port Kembla Coal Terminal. South 32, the buyer of the asset, was unable to obtain regulatory clearance from the Australian Competition and Consumer Commission (ACCC) for the contemplated $200M deal. In our opinion, the failure of the deal closing is slightly positive for Peabody’s valuation, given the extremely strong met coal prices at this time. Assuming a 2Q benchmark of $300/Mt, the mine could generate around $130M in EBITDA in 2017. We estimate that on our price deck of $140/Mt in 2018, the mine would generate $42M in EBITDA. We see EBITDA at $29M on our long- term price of $130/Mt. We have tweaked our estimates to reflect the contributions from Metropolitan to Peabody going forward. We see the transaction adding about $1 to our price target, which is now $34 per share. We maintain our Outperform rating.”

According to TipRanks.com, Pipes is a 4-star analyst with an average return of 5.4% and a 50.0% success rate. Pipes covers the Basic Materials sector, focusing on stocks such as Newmont Mining Corporation, Stillwater Mining Company, and Westmoreland Coal Company.

Peabody Energy Corp has an analyst consensus of Moderate Buy, with a price target consensus of $34.

Based on Peabody Energy Corp’s latest earnings report for the quarter ending December 31, the company posted quarterly revenue of $1.42 billion and GAAP net loss of $204 million. In comparison, last year the company earned revenue of $1.04 billion and had a GAAP net loss of $165 million.

Based on the recent corporate insider activity of 36 insiders, corporate insider sentiment is positive on the stock. This means that over the past quarter there has been an increase of insiders buying their shares of BTUUQ in relation to earlier this year.

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Peabody Energy Corp. engages in the business of coal mining. It operates through the following segments: Powder River Basin Mining; Midwestern U.S. Mining; Western U.S. Mining; Australian Metallurgical Mining; Australian Thermal Mining; Trading and Brokerage; and Corporate and Other. The U.S. Mining segment mines, prepares, and sells thermal coal. The Australian Mining segment engages primarily in the export of coal. The Trading and Brokerage segment engages in the direct and brokered trading of coal and freight-related contracts through the trading and business offices. The Corporate and Other segment includes selling and administrative expenses, corporate hedging activities, mining and export/transportation joint ventures, restructuring charges and activities associated with the optimization of coal reserve and real estate holdings, minimum charges on certain transportation-related contracts, the closure of inactive mining sites and certain energy-related commercial matters. The company was founded by Francis S. Peabody in 1883 and is headquartered in St. Louis, MO.