This article
was originally published by Seeking Alpha on September 22, 2014
By Sarfaraz
A. Khan
Summary: Peabody
Energy’s shares have dropped to 52-week lows. Several analysts have recently
downgraded the stock, citing identical reasons. Are there any signs of
improvements in market conditions?
The shares of
Peabody Energy (NYSE:BTU), the world's largest private sector coal producer
that makes both thermal and metallurgical coals, have recently touched 52-week
lows and you can hardly blame the company since it is an awful time to be a
coal producer.
Peabody's
shares, along with other coal stocks such as Alpha Natural Resources (NYSE:ANR)
and Arch Coal (NYSE:ACI), have witnessed double-digit drops this year on the
back of weakening coal market fundamentals. Meanwhile, the Obama
administration's decision to cut carbon emissions has also not helped.
The
Environmental Protection Agency has planned to cut carbon emissions by 30% by
2030 from 2005 levels by targeting coal-based power plant operators, which
could have an adverse impact on the demand of coal.
To exacerbate
the already tough situation, analysts have moved in with their downgrades. On
Thursday, Goldman Sachs cut Peabody Energy's rating from Neutral to Sell as the
investment firm projects further drops in metallurgical coal prices in the
fourth quarter and isn't optimistic about thermal coal prices either. Thermal
coal is mainly used for power generation while metallurgical coal is used in
steel making.
Meanwhile, analysts at Cowen & Co have also
predicted additional drops in coal prices in the fourth quarter. Similarly,
Northland Securities has also downgraded the company's rating to Reduce.
Consequently, Peabody Energy's shares dropped to 52-week lows …. Read fullarticle at Seeking Alpha.
