FBR Capital Reiterates “Outperform” Rating on Peabody Energy (BTU)

Coal producer Peabody Energy Corporation ( BTU ) on Monday saw its “Outperform” rating reiterated by analysts at FBR Capital Markets. The firm also backed its $77 price target on BTU, which implies a 32% upside to the stock’s Friday closing price of $58.17. An FBR analyst commented, “The [coal] sector has declined off the top and is poised to react less to negative news and, hopefully, more favorably to positive news. BTU has lagged its U.S. and Australian peers by about 10%–15% for the one-, three-, and six-month periods, in part from 4Q10′s and 1Q11′s Australian flood impact and acquisition worries. We believe shares already discount the news and are now a bargain in front of several expected catalysts: (1) Australian production recovery, (2) West Coast port announcement, (3) formal sanctioning of Australia Millennium mine, (4) trading group upside with rising price volatility ($5/share value), (5) Mongolia optionality, (6) China project values becoming better understood, (7) acquisition risk overstated, with an outstanding track record.” Continuing, “While 2011 estimates may initially be reset due to 1Q11′s Australian supply issues, we believe estimates will be walked up over the rest of the year from rising prices, faster supply recovery, trading activity, and use of free cash flow.” Peabody Energy shares fell 25 cents, or -0.4%, in premarket trading Monday. The company is slated to reported its fourth quarter earnings results on Tuesday. The Bottom Line Shares of Peabody Energy ( BTU ) have a .58% dividend yield, based on last night’s closing stock price of $58.17. The stock has technical support in the $54-$56 price area. If the shares can firm up, we see overhead resistance around the $62-$65 price levels. Peabody Energy Corporation ( BTU ) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.4 out of 5 stars. Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .

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FBR Capital Reiterates “Outperform” Rating on Peabody Energy (BTU)

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