Peabody Energy Corporation (NYSE:BTU) Dip After SC Ruling and Downgrade


Dallas, Texas 06/29/2015 (Financialstrend) – Peabody Energy Corporation (NYSE:BTU) was down by 10% in Friday’s trading session. The stock was impacted by twin factors of an unfavorable Supreme Court ruling and a downgrade by analysts. The past week saw most coal mining companies cooling off by nearly 20%.

Firstly, the energy company was caught on the downturn due to a ruling by the Supreme Court, which upheld the decision of the Environment Protection Agency to close down utilities with coal-fired plants. With the SC now ruling EPA was within its scope to close down coal-based plants coal mining company stocks once again slide by nearly 70%. For most part of the year thus far, the coal mining stocks have been reporting fall in share prices averaging 70.4% to as much as 86.6% in the past year.

Peabody Energy Corporation (NYSE:BTU) and peers have in recent times been under pressure on several fronts. They suffer from increase in the costs of products, while the prices that the coal fetches continue to dip over the past couple of years.

Downgraded By Moody

Things have worsened for Peabody Energy with analyst firm, Moody’s, downgrading the credit rating on June 25. The analyst now has a rating of B3 from the earlier B2, along with a negative outlook. The rating indications imply that Peabody Energy Corporation (NYSE:BTU) is likely to suffer from further credit worthiness. Until now, much of the fall that BTU saw, was considered to be corresponding with the fall in share prices of the industry due to the fall in seaborne metal coal markets.

However, analysts at Moody perceive BTU is likely to see further deterioration in Debt/EBITDA ratio by over 9 times in 2015. It is likely to see roughly 7 times leverage by 2016 and with no asset sales, it is likely to have negative cash flow in the fiscal.