NEW YORK (TheStreet) -- Shares of Peabody Energy Corp. (BTU) are declining by 6.80% to $3.15 in mid-afternoon trading on Monday, after Goldman Sachs analysts commented on the coal sector and noted that Peabody has exposure to the Powder River Basin, an area on which the company has a bearish view.
"Coal commodity fundamentals are undoubtedly challenged and unlike the situation in the oil/gas sector there is limited resource dynamism (resource/economics upside and cost downside) that can offset the impact of a negative commodity price outlook," Goldman said, according to Barron's.
So far today, 10.73 million shares of Peabody Energy have exchanged hands as compared to its average daily volume of 13.11 million shares.
"Sell Powder River Basin thermal coal. We have a structurally bearish view on thermal coal, particularly Powder River Basin (PRB) thermal coal. We recommend investors sell Cloud Peak Energy given pure-play exposure to PRB. Sell-rated Peabody Energy also has exposure to PRB," the firm continued.
Based in St. Louis, Peabody Energy is the largest private sector coal company in the world. Peabody's focuses primarily on the mining, sale and distribution of coal.
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 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 deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and weak operating cash flow."
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 264.1% when compared to the same quarter one year ago, falling from -$48.50 million to -$176.60 million.
- The debt-to-equity ratio is very high at 2.55 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, BTU has a quick ratio of 0.61, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- 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 currently extremely low, coming in at 14.06%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -11.48% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to $3.40 million or 93.71% 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.
- You can view the full analysis from the report here: BTU Ratings Report