Nomura Securities Upgrades Peabody Energy (BTU) to Neutral, Concerns Priced In

March 18, 2013 7:49 AM EDT Send to a Friend
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Price: $12.03 --0%

Rating Summary:
    12 Buy, 7 Hold, 3 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 8 | Down: 5 | New: 7
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Nomura Securities upgraded Peabody Energy (NYSE: BTU) from Reduce to Neutral with a price target of $22.00.

The upgrade comes as key market concerns and EPS risks surrounding BTU are now factored into the valuation, according to the firm's view.

"We believe the cost pressures facing BTU are largely well known by the market and our recent visit with management gave us increased confidence that BTU can achieve improved unit costs in 2H13," analyst Curt Woodworth stated. "Correlation to the underlying commodity remains a key risk factor to press a short trade on BTU given our expectation for PRB prices to move higher by the end of 2013 and the potential for improved met prices as global steel production improves in Asia. We believe a solid summer coal burn driven by reverse switching and normal weather can result in significant draws of PRB inventories. Peabody continues to trade at rich multiples even off 2014 our estimates (7.9x EV/EBITDA), which already assume a healthy recovery in benchmark met coal prices back to $190/tonne."

The firm trimmed FY13E EPS from ($0.20) to ($0.30) and FY14E EPS from $1.10 to $0.80.

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 $21.84 yesterday.




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