NEW YORK (TheStreet) -- Shares of Peabody Energy Corp. (BTU) - Get Peabody Energy Corporation Report are down 6.67% to $7.98 as natural gas prices fell to nearly a two-year low Monday, increasing competition with coal for electricity generation, the Wall Street Journal reports.
Natural gas for January delivery was down 33.1 cents, or 9.5%, at $3.133 a million British thermal units on the New York Mercantile Exchange. It was the biggest one-day percentage loss since February, and the lowest intraday price since January 2013. As of 11:37 a.m in New York, it was down 7.45%.
Separately, U.S. coal companies will no longer be able to settle royalties at low domestic prices when they make lucrative sales to Asia according to reforms proposed by the Interior Department on Friday, Reuters reported.
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Peabody Energy is among the leaders in mining coal from federal land in the West, Reuters added.
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 several weaknesses, 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 unimpressive growth in net income, 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:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 477.0% when compared to the same quarter one year ago, falling from -$26.10 million to -$150.60 million.
- Currently the debt-to-equity ratio of 1.67 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 15.65%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -8.74% is significantly below that of the industry average.
- Net operating cash flow has decreased to $174.80 million or 17.77% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 56.56%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1066.66% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full analysis from the report here: BTU Ratings Report