Why Peabody Energy (BTU) Stock Is Up Today

NEW YORK (TheStreet) -- Peabody Energy (BTU) was gaining 2.6% to $12.98 Tuesday after raising its EBITDA guidance for the third quarter.

The coal company said it now expects EBITDA of $190 million to $210 million for the third quarter, up from its previous guidance of $140 million to $190 million. Peabody Energy said the increase reflects continued strength in its operating performance.

Peabody Energy also lowered its adjusted diluted EPS estimates for the third quarter to a loss of between 69 cents and 63 cents a share from a loss of between 53 cents and 40 cents a share.

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The company expects to announce its third quarter results on October 20.

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 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 181.1% when compared to the same quarter one year ago, falling from $90.40 million to -$73.30 million.
  • Currently the debt-to-equity ratio of 1.51 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 0.63, 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 16.52%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -4.16% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to $21.20 million or 64.48% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much 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 28.55%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 171.79% 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

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