Nomura Securities Downgrades Peabody Energy (BTU) to Reduce on Earnings Risk and Weak Growth

October 12, 2012 7:48 AM EDT Send to a Friend
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Price: $10.27 -0.77%

Rating Summary:
    12 Buy, 7 Hold, 3 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 24 | Down: 23 | New: 17
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Nomura Securities downgraded Peabody Energy (NYSE: BTU) from Neutral to Reduce with a price target of $22.00 (from $25.00) to reflect more conservative forward multiples given elevated earnings risk and weaker growth rates.

"We expect continued supply rationalization among the higher-cost producers, which should start to affect Australian semi-soft and PCI operators given their higher positions on the quality-adjusted supply cost curve," analyst Curt Woodworth said. "We also see risk PCI spreads starting to widen and injection rates falling as steel producers maintain efficiency with coke ovens. Peabody’s high-cost met position, weak product mix are concerns. We see cost headwinds accelerating for BTU on Royalties, FX, and Volume Pressure. While a shift to greater owner-operated mining and lower stripping ratios from the Macarthur assets could help, we see 2013 as a very challenging cost year for BTU."

The firm cut 3Q12E EPS from $0.40 to $0.36; F12E EPS from $1.85 to $1.50; F13E EPS from $1.65 to $0.15 (lowest on the Street).

For an analyst ratings summary and ratings history on Peabody Energy click here. For more ratings news on Peabody Energy click here.

Shares of Peabody Energy closed at $26.18 yesterday.


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