UPDATE: Morgan Stanley Upgrades Peabody Energy (BTU) to Overweight

Morgan Stanley upgraded Peabody Energy (NYSE: BTU) from Equalweight to Overweight with a price target of $30. Analyst Evan L Kurtz thinks Peabody is the best way to play a modest recovery in coal.

"While challenges from gas and regulations remain, the very significant inventory cycle that has faced the thermal coal market since 2012 is ending. Met coal cuts may also be sowing the seeds for a bottom in that market as well," said Kurtz.

"We think BTU is the best way to play this modest recovery, for five reasons: 1) The company has large exposure to the PRB and ILB markets, our favored basins. 2) We think little value is assigned to the company’s met portfolio, which could change as prices tick higher. 3) We see less downside risk relative to peers due to a more manageable debt load and a consistently low-cost portfolio. 4) BTU pays the highest dividend yield in our coverage, with room for eventual increased capital return. 5) The stock has recently lagged other PRB majors like CLD (NYSE: CLD) and ACI (NYSE: ACI)," he added.

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 $18.66 yesterday.

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