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3 Things You Need to Know About Peabody Energy
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3 Things You Need to Know About Peabody Energy


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  • 1. 3 Things You Need to Know About Peabody Energy
  • 2. 1. Stock Performance
  • 3. 1) Stock Performance Peabody Energy (NYSE: BTU) is the largest non- state operated coal company in the world.
  • 4. 1) Stock Performance But bigger isn’t always better. Peabody Energy stock has been volatile, to say the least. The double-whammy of an upended energy sector, as well as the Global Financial Crisis (GFC), has kept energy investors on the edge of their seats for the last decade.
  • 5. 1) Stock Performance If you bought Peabody shares exactly 10 years ago and sold just before the GFC hit, you pocketed 550% stock price gains. That’s well above the S&P 500’s (INDEX: ^GSPC) measly 15%.
  • 6. 1) Stock Performance But if you bought Peabody shares in early 2005 and are still hanging on, your stock hasn’t gained a single cent.
  • 7. 1) Stock Performance On the upside, Peabody Energy has consistently raised its dividend throughout, although its erratic stock price has pulled yields up and down over the past decade.
  • 8. 2. Transportation Costs
  • 9. 2) Transportation Costs Despite Peabody’s rapport as a multinational coal company with customers across 25 countries and six continents (sorry Antarctica), its assets are fairly concentrated.
  • 10. 2) Transportation Costs The company has a dominant presence in the Powder River Basin in Wyoming and the Illinois Basin in Illinois and Indiana.
  • 11. 2) Transportation Costs Peabody’s North Antelope Rochelle mine in Wyoming accounted for a whopping 111 million tons of coal sold in 2013. That’s more than double the volume sales of its six next largest mines!
  • 12. 2) Transportation Costs Nearby utilities like FirstEnergy Corp. (NYSE: FE) and American Electric Power Company (NYSE: AEP) have stuck with coal as their main fuel source. For these companies, low transportation costs means coal is the fuel of choice.
  • 13. 2) Transportation Costs But a growing natural gas pipeline network and proliferation of Midwest wind farms are eroding Peabody’s transportation cost advantage.
  • 14. 2) Transportation Costs It’s windy in coal country.
  • 15. 3. Global Opportunities
  • 16. 3) Global Opportunities
  • 17. 3) Global Opportunities With only 2% of its U.S. coal exported and domestic growth prospects dwindling, Peabody will need to look abroad more than ever before.
  • 18. 3) Global Opportunities Thermal coal, used primarily to generate electricity, is getting hit by environmental policy from all sides. The U.S. is cutting it out of its energy system, but even China and India are taking steps to wave goodbye to this carbon- and smog- producing fuel source.
  • 19. 3) Global Opportunities One of Peabody’s steadiest international opportunities comes from metallurgical coal, used to create steel and relatively irreplaceable. In 2013, worldwide steel production increased 3.5%, pushed into the positive by Asia alone.
  • 20. 3) Global Opportunities In 2013, Peabody sold 15.9 million tons of metallurgical coal. That’s 13% more than in 2012 and 71% more than in 2011.
  • 21. 3) Global Opportunities From 2013 to 2016, Peabody expects metallurgical coal demand to grow 10% to 15%. And while it also expects overall coal demand to rise significantly, this prediction depends much more on precarious policy in China and India.
  • 22. Peabody Energy Historically lackluster stock price gains are no reason to not buy Peabody shares. But a tough U.S. market is.
  • 23. Peabody Energy Investors will want to weigh Peabody’s international opportunities carefully before marking this stock a buy. And even with potential upside, don’t forget to price in the risk of adding an international coal company to your portfolio. The risk of further decline is just as real as potentially massive upsides.
  • 24. Hedge Your Coal Bet With Something Safer A coal investment carries a great deal of risk, and smart investors are hedging their bets with other energy stocks. You already know record oil and natural gas production is changing the lives of millions of Americans. But what you probably haven’t heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America’s greatest energy companies. Take advantage of this profitable opportunity by grabbing your brand-new special report, “The IRS Is Daring You to Make This Investment Now!,” and you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.