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Peabody Energy: How Are Analysts Rating It?

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Analysts’ ratings

Of the two analysts covering Peabody Energy (BTUUQ), both gave the company a “sell” rating. There were no “hold” or “buy” ratings for the stock as of July 13, 2016.

Analysts’ also expect Peabody Energy to report EPS (earning per share) of -$4.55 for 2Q16 compared to -$9.13 in 2Q15 and -$7.55 in 1Q16.

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Peabody Energy’s consensus

For 2Q16, analysts expect Peabody Energy (BTUUQ) to report muted revenue figures. They also expect the company to report operating losses for 2Q16. Analysts anticipate lower EBITDA (earnings before interest, tax, depreciation, and amortization) and EBITDA margins compared to 2Q15.

Among major coal (KOL) mining companies, analysts recommend a “sell” for Peabody Energy. The recommendation was primarily due to the uncertainty surrounding the effect of Chapter 11 on the company’s operations and the successful execution of its reorganization plan.

BTUUQ had a relatively high leveraged position compared to peers Cloud Peak Energy (CLD), Westmoreland Coal (WLB), and Alliance Resource Partners (ARLP).

Post-1Q16 developments

On May 9, 2016, Peabody Energy announced that its Australian subsidiaries have entered into an agreement with Pembroke Resources to sell the undeveloped metallurgical reserve tenements in Queensland’s Bowen Basin. According to a company press release, the value of the deal is $104 million AUD (Australian dollars) in cash plus a royalty stream. Peabody has received cash proceeds of $65 million AUD as part of the transaction. The company expects to receive $22 million AUD before the end of 3Q16.

On May 17, 2016, Peabody announced that it has received final court approval for an $800 million DIP (debtor-in-possession) financing facility. This includes a $500 million term loan, a $200 million bonding accommodation facility, and a cash-collateralized $100 million letter of credit facility. The approval provides Peabody with access to the capital to continue a normal course of business during the Chapter 11 restricting process.

On May 19, 2016, Peabody announced that the company has completed the sale of its 5.1% participation interest in the Prairie State Energy Campus to the Wabash Valley Power Association for $57 million.

Next, we’ll analyze analysts’ revenue estimates and find out whether these recommendations are conservative or optimistic.

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