Peabody Energy is Tuesday's IBD Stock Of The Day, as the U.S. coal producing giant looks to capitalize on increased demand for coal, driven by rising natural gas prices this winter. BTU shares edged higher Tuesday, closing in on an early entry point.
U.S. natural gas prices advanced for a fifth straight session Tuesday, trading up 5.5% to around $7 per million British thermal units. Natural gas prices are up almost 29% from a Dec. 6 low, amid forecasts for cold weather across the country. On Monday, U.S. natural gas prices soared around 10%.
Coal Stocks Surge As Energy Crisis Drives Coal Use Toward Record Highs
Higher natural gas prices are one of the leading factors driving a powerful rally in coal stocks during the first half of 2022. Global natural gas supplies tightened and prices rose following Russia's invasion of Ukraine in February. After an initial run-up, Peabody, like many coal stocks, has consolidated since April.
Inflated coal prices helped Peabody Energy top earnings and revenue views in its third-quarter results in early November. The company reported EPS of $2.34, up from a 60-cent loss a year ago. Revenue advanced 99% to $1.3 billion.
Peabody Energy's Q3 results were led by its seaborne thermal coal division, with deliveries primarily to the Asia-Pacific market. In addition, adjusted earnings before interest, taxes, depreciation and amortization grew 64% to $171 million, as the average realized price rose 31%.
In Q3, Peabody Energy's U.S. thermal coal business delivered $111 million in adjusted EBITDA, up 35% from a year ago.
Coal Stock Comeback
Coming off of a slew of bankruptcies throughout the last decade, the coal industry has made a comeback in 2022 on the back of increased natural gas prices that have made coal a more competitive fuel. The International Energy Agency has projected that global coal demand will match record highs in 2022 and increase to new highs in 2023.
Col miners including Peabody Energy and coal mining outfits Alliance Resource Partners, Alpha Metallurgical Resources and Arch Resources have rebounded into constructive chart patterns.
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Peabody Energy Stock
Peabody Energy stock advanced 2.24% Tuesday to 28.48 during regular market trading, with volume down around 50%. BTU shares have formed a handle with a 32.99 buy point, according to MarketSmith analysis.
Peabody Energy stock is rebounding from its 50-day moving average. If shares retake Tuesday's high of 29.08 that would offer aggressive investors an early entry, with the stock breaking the handle downtrend and getting above its 21-day exponential moving average.
Peabody Energy is expected to report fourth-quarter earnings in February 2023. Analysts project earnings to fall 44% to $2.18 per share. Meanwhile, Wall Street forecasts sales rising 8% to $1.4 billion in Q4.
Analysts predict full-year 2022 earnings ballooning 108% to $6.25 per share. The Street expects revenue to shoot up 42% to $4.7 billion.
IBD ranks Peabody Energy stock second in the Energy-Coal industry group. BTU stock has a Composite Rating of 96 out of 99. Its Relative Strength Rating is 98; the RS Rating is an exclusive IBD Stock Checkup gauge for share price movement, with a 1-to-99 score. The EPS Rating is 78.
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