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Peabody Downgraded to Hold
We expect Peabody Energy (BTU - Analyst Report) to report a solid 4Q-08, growing earnings from continuing operations 25% year-over-year to $0.89 per shares. However, we are downgrading BTU from a Buy to a Hold and are lowering our six-month target price to $25.00 per share from $77.00 per share.
The current economic downturn led by the global financial crisis has made the future uncertain. We believe that BTU will trade are current levels as there is no immediate catalyst to raise its share price.
As emerging Asian economies will likely lead the global recovery in late '09, this should give upward momentum to BTU. We maintain our positive long term view of the coal space and see Peabody as the premium player in its industry.