Peabody Energy Corporation Stock Hold Recommendation Reiterated (BTU)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Peabody Energy Corporation (NYSE: BTU) has been reiterated by TheStreet Ratings as a hold with a ratings score of C . The company's strongest point has been its a solid financial position based on a variety of debt and liquidity measures that we have looked at. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

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Highlights from the ratings report include:
  • BTU, with its decline in revenue, slightly underperformed the industry average of 4.4%. Since the same quarter one year prior, revenues fell by 10.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • PEABODY ENERGY CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, PEABODY ENERGY CORP swung to a loss, reporting -$1.85 versus $3.76 in the prior year. This year, the market expects an improvement in earnings ($0.48 versus -$1.85).
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 36.49%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 505.43% 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.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. 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.
  • The gross profit margin for PEABODY ENERGY CORP is rather low; currently it is at 23.50%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -49.87% is significantly below that of the industry average.

Peabody Energy Corporation engages in the mining of coal. It mines, prepares, and sells thermal coal to electric utilities and metallurgical coal to industrial customers. Peabody Energy has a market cap of $6.37 billion and is part of the basic materials sector and metals & mining industry. The company has a P/E ratio of 28.3, above the S&P 500 P/E ratio of 17.7. Shares are down 10.7% year to date as of the close of trading on Wednesday.

You can view the full Peabody Energy Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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