Peabody Energy, which also has significant coal assets in Australia, has seen its shareprice plunge to below $US20 over the last three months as investors continue to punish coal stocks.
JP Morgan John Bridges lowered the recommendation for Peabody and Arch from neutral to underweight in a recent report on coal companies.
“We remain convinced that a diverse energy supply to the power grid is important, and decision makers understand this but we expect 2015/16 to remain difficult for the equities as they go though the sausage machine of re-organization,” he said.
“We continue to remain cautious as we think about the outlook for next year. The natural gas market remains oversupplied; the utility coal stockpiles are building and the strong $US is hurting coal exports. Currencies aren’t helping much by delaying the required supply response. Consequently, we are downgrading BTU [Peabody] and Arch from Neutral to UW.”
Peabody last month announced a 1-for-15 reverse stock split on shares of its New York-listed stock on to help it better fight its way through low coal prices.
“We thank our shareholders for their continued support as we work through these challenging times," Peabody president and CEO Glenn Kellow said.
“Peabody is advancing further initiatives across our global platform with an intense focus on operational excellence, lean organisation, portfolio management and financial strength.”
The reverse stock split kicked in at the close of business on September 30. The stock started trading on a split-adjusted basis at market open the next day.
Every 15 shares of common stock shareholders own was combined into one share of common stock, and the number of outstanding shares was reduced from about 278 million to roughly 19 million.