The largest private coal company in the world saw its shares tumble big time on Tuesday. While various segments of the energy sector have done well, including oil and renewable energy, coal seems to have suffered over the past few years due to its “dirty” image.
With many companies struggling to change the public image surrounding the industry, most experts have a bleak appraisal of the sector’s future in comparison to “greener” sources of energy. Peabody Energy (NYSE: BTU) fell by over 20% on Tuesday after reporting poor financial results despite the fact that it had warned shareholders in September that this upcoming quarter would be disappointing.
While this wasn’t a surprising turn of events considering that the company has been struggling for a while now, the markets still reacted quite severely after Peabody reported a major Q3 loss. Specifically, the quarterly report saw a loss of $0.57 per share in comparison to the positive $0.63 per share in earnings seen a year ago. Overall, earnings have fallen by 39% this quarter. Previous quarters surprisingly enough had seen earnings actually surpass industry expectations, although shares of the coal giant continued to plummet nonetheless.
“Peabody’s third quarter was marked with some notable achievements, several challenges and multiple changes to our portfolio and organization,” said Peabody’s chief executive and President Glenn Kellow. “Looking ahead, our success will be defined by the implementation of our three strategies to create value, bolstered by streamlining our organization, resetting operational performance and strengthening our portfolio. We have a comprehensive agenda of actions under way across each of these dimensions, and I believe we have tremendous ability to create value over time.”
There are some positives, however. Peabody does still has a positive operating cash flow of around $553 million so far over the past 12 months, although this is around a 50% decline from the previous year. Peabody also had to reinvest significantly back into its existing operations, around $148 million in comparison to the $66 million seen in 2018. Although the company is still managing to generate cash in what’s been a difficult time for the coal industry at large, it’s not enough to make even value investors consider the stock to be a worthwhile buy.
Shares of Peabody Energy ended up falling 21.5% over the course of the day. Over the past year, the company has continued on a steady decline, shedding around 54% of its market value as sentiments surrounding the coal sector continue to get worse. At this point, few analysts or shareholders alike consider Peabody a safe long-term investment unless the company ends up falling to the point it becomes genuinely undervalued in comparison to its asset portfolio.
Peabody Company Profile
Peabody Energy mines and sells coal though 26 coal mines in the United States and Australia. Peabody also markets and brokers coal, both as principal and agent, and trades coal and freight-related contracts through offices in China, Australia, the United Kingdom, Germany, Singapore, Indonesia, India, and the U.S. The company has more than 7 billion tons of proven and probable coal reserves. – Warrior Trading News
