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Why Peabody Energy (BTU) Stock Is Up Today

Stocks in this article: BTU

NEW YORK (TheStreet) -- Peabody Energy  (BTU), the largest private-sector coal miner in the world, rose Thursday after the company announced it would review some of its more expensive Australian operations.

The stock was down in morning trading after the company reported a greater-than-expected loss in its first-quarter report but rallied upon the review announcement.

"We are having some pretty serious looks at couple of operations," said CEO Gregory Boyce on a conference call when asked about the company's closing some of its metallurgical coal operations, according to Reuters.

Peabody reported net loss attributable to shareholders of $48.5 million, or 18 cents a share, which widened from $23.4 million, or 9 cents a share, in the same period one year earlier. Revenue also dropped 7% to $1.63 billion from $1.75 billion, which was less than the Capital IQ consensus estimate of $1.69 billion.

The stock was up 3.33% to $18 at 2:37 p.m. on Thursday.

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Separately, TheStreet Ratings team rates PEABODY ENERGY CORP as a "sell" with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate PEABODY ENERGY CORP (BTU) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Currently the debt-to-equity ratio of 1.54 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, BTU has a quick ratio of 0.57, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • The gross profit margin for PEABODY ENERGY CORP is rather low; currently it is at 15.23%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -32.45% is significantly below that of the industry average.
  • Net operating cash flow has decreased to $178.40 million or 20.21% when compared to the same quarter last year. Despite a decrease in cash flow of 20.21%, PEABODY ENERGY CORP is in line with the industry average cash flow growth rate of -22.97%.
  • BTU has underperformed the S&P 500 Index, declining 13.05% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PEABODY ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: BTU Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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