Peabody Energy (BTU) Stock Rises Today on Renewed Takeover Chatter

NEW YORK (TheStreet) -- Shares of Peabody Energy  (BTU) were up 4.67% to $11.65 in afternoon trading Wednesday amid renewed chatter that the company could be a takeover target, according to theflyonthewall.com.

Some unconfirmed reports, including some chatter on Twitter  (TWTR) , have stated that BHP Billiton  (BHP) , the world's largest mining company by 2013 revenue, could be interested in acquiring Peabody energy for as much as $25 a share.

Peabody Energy is the largest private-sector coal company in the world.

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Peabody President COO Glenn Kellow delivered a keynote address at the Brisbane Global Cafe on Tuesday and spoke about the world's increasing need for energy.

"As leaders of G20 member nations prepare to convene this week, economic growth, global poverty, geopolitical insecurity and pandemic threats are among the most pressing concerns," Kellow said. "Access to energy plays a vital role in addressing each of these issues."

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 a few notable 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, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

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 0.56, 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.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 46.32%, 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.
  • PEABODY ENERGY CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, PEABODY ENERGY CORP continued to lose money by earning -$1.12 versus -$1.84 in the prior year. For the next year, the market is expecting a contraction of 25.0% in earnings (-$1.40 versus -$1.12).
  • You can view the full analysis from the report here: BTU Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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