Peabody Energy (BTU) Stock Forecast & Price Target

Peabody Energy Corp is positioned to benefit from increased seaborne thermal sales and a strategic shift towards a higher-quality metallurgical coal mix, underscored by the expected addition of resources from the impending acquisition of Anglo's met assets and the ramp-up of the Centurion mine. The company's operations in the Powder River Basin have yielded stronger-than-anticipated results, contributing to a reduced cost per ton and enhancing overall profitability potential. As the development rates and sales forecast improve, Peabody's financial metrics suggest a favorable outlook, with anticipated increases in EBITDA and free cash flow driven by a transformative product portfolio.

Peabody Energy's financial outlook is negatively impacted by a reduction in full-year 2024 EBITDA estimates, which have declined to $858 million from $902 million, reflecting ongoing pressure from lower met coal realizations and declining PRB sales. Additionally, anticipated weaker prices across seaborne met and thermal coal markets, coupled with margin pressures from increased costs per ton, heighten concerns regarding profitability. Further compounding these issues is the execution risk associated with the recent acquisition, alongside a notable decline of over 20% in share value since the announcement, which raises doubts about the company’s ability to maintain robust free cash flow and complete the acquisition without the need for equity financing.