NEW YORK (TheStreet) -- Shares of Peabody Energy (BTU) touched a one-year low of $82.01 but rose 4.25% to $8.59 in late morning trading Tuesday as oil prices recovered slightly after sinking to a new five-year low.
Brent crude for January delivery dipped as low as $65.29, the lowest point since September 2009, according to Reuters. Brent recovered to $66.79 at 11:25 a.m., according to CNBC.
The rebound occurred as some oil buyers returned in the hopes that prices had bottomed after a 40% plunge since June, according to Reuters.
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Brent crude fell more than 4% to a session low of $65.93 a barrel on Monday, its lowest point since October 2009. WTI Crude also dropped below $63 for the first time since July 2009.
The price drop occurred after Morgan Stanley reduced its 2015 forecast for Brent crude in a research note issued late Friday. The firm said Brent could drop to as low as $53 a barrel next year, although it forecast a base case scenario of $70. Morgan Stanley had previously expected $98 a barrel.
"Without OPEC intervention, markets risk becoming unbalanced, with peak oversupply likely in the second quarter of 2015. Prices are set up to fall in the first half of 2015," the firm wrote.
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, 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 51.51%, 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