I’m Bullish on BTU, a stock that is way oversold. Credit Suisse today came out with a 12 month target of $44 per share and an Outperform rating. The 52 week price range is 61.37 – 21.12. The adjustment came after Credit Suisse attended the annual investor day in New York.
Here is the statement from Credit Suisse:
While near-term global uncertainty continues, we maintain our view that Peabody represents the best way to play the
attractive long-term global secular trends for thermal and met coal demand. We believe the shares look compelling for longer-term investors, trading at only 4.0x our 2013 EBITDA estimate and 3.6x our 2014 EBITDA estimate. Our $44 target price reflects 5.4x our 2014 EBITDA estimate. Maintain Outperform.
Here are is the Official Statement from Peabody Energy:
“We have multiple opportunities in coming years across all key levers of value creation: production growth, price upside, cost containment and valuation expansion,” said Peabody Energy (NYSE: BTU) Chairman and Chief Executive Officer Gregory H. Boyce. “There are bright spots amid recent market headwinds, including the recent increase in quarterly seaborne metallurgical coal prices, accelerating China coal imports and signs of stabilizing U.S. coal supply-demand fundamentals. Longer term, rising electricity generation and steel production required to fuel growing economies of the Asia-Pacific region will continue to drive sustained increases in global coal demand.”
Boyce said that the company was completing a number of late-stage projects in Australia while re-evaluating the timing of select emerging projects. The company is completing the Millennium Mine expansion and is beginning to mine first coal at the Burton extension. At North Goonyella Mine, the implementation of Longwall Top Coal Caving technology is on target to begin adding expanded volumes in late 2013. The Metropolitan Mine modernization is on schedule but the completion of the expansion is now targeted for 2014 to 2015 to enable higher volumes than earlier projected. The company is planning on undertaking additional evaluation before commencing development on the Wambo Open-Cut expansion and Codrilla Mine, with startup timing to be determined.
AUSTRALIA PRODUCTION TARGET UP Nearly 100%
With the modified timeframes, Peabody now targets Australian coal production of 45 million to 50 million tons by 2015 to 2017, up from 25 million tons in 2011.
GLOBAL COAL MARKETS
“China’s coal imports are accelerating in recent months, and we project they will reach a record 285 million tonnes in 2012 as the country increasingly looks to the seaborne coal markets,” said Boyce. “We expect global metallurgical coal use to increase 25 percent by 2016, translating to an additional 250 million tonnes of demand growth, with the bulk of increases led by China and India.”
The recent BP Statistical Review of World Energy reports that coal consumption grew by 5.4 percent in 2011 – the fastest-growing major fuel in the world.
Coal now accounts for 30.3 percent of global energy consumption, the highest share since 1969.
Australia is expected to remain the dominant seaborne coal supplier, providing the majority of growth in global seaborne metallurgical coal, high-value pulverized coal injection (PCI) and high-CV thermal coal products.
ACQUISITION INTEGRATION ON TRACK
The integration of Peabody Energy Australia PCI (formerly Macarthur Coal) into the company’s global platform is progressing well, with operational improvements and synergy targets on track for the world’s largest seaborne supplier of low-vol PCI coal.
“PCI’s coal deposits are stronger than we had expected in both quality and quantity, and this delivers support for the life of existing operations as well as a strong development pipeline for new mines,” said Boyce.
U.S. COAL MARKETS
Boyce said that while the U.S. coal market has been impacted by a weak economy and low natural gas prices, the outlook for coal has strengthened following the recent sharp declines in U.S. shipments, rise in natural gas prices and seasonal drawdowns in utility stockpiles.
Peabody continues to project that U.S. coal demand will decline 100 million to 120 million tons in 2012.
“Coal supply-demand fundamentals appear to be coming back into balance, with May coal shipments down 145 million tons on an annualized pace and coal inventories beginning their seasonal drawdown,” said Boyce.
Recent improvement in natural gas prices point to Powder River Basin and Illinois Basin products being the first to rebound for coal-fueled generation.
PEABODY’S U.S. POSITION
“Peabody will continue to evaluate U.S. production levels as the year progresses,” said Boyce. “We are very well positioned in the United States, with 2012 production fully priced and nearly 70 percent of 2013 volumes priced based on current production levels.”
Peabody continues to advance a number of U.S. export growth initiatives to meet the increasing global demand for seaborne coal.
U.S. thermal exports could grow to between 150 million and 170 million tons within five years, and Peabody is developing a sustainable large-volume export business from the West, Gulf and East coasts to capture emerging opportunities. Peabody shipped U.S. exports of 6.6 million tons in 2011, and the company is targeting 10 million tons for 2012.
Source: Peabody Energy