There's been a major selloff in Peabody Energy Corporation (NYSE:BTU) shares in the week since it released its quarterly report, with the stock down 27% to US$0.90. Revenues of US$671m fell short of estimates by 13%, but statutory losses were tightly controlled, with the per-share loss of US$0.69 being 11% smaller than consensus predictions. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Following the latest results, Peabody Energy's five analysts are now forecasting revenues of US$3.41b in 2021. This would be a reasonable 4.7% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 91% to US$1.90. Before this latest report, the consensus had been expecting revenues of US$3.58b and US$2.26 per share in losses. Although the revenue estimates have fallen somewhat, Peabody Energy'sfuture looks a little different to the past, with a the loss per share forecasts in particular.
The analysts have cut their price target 28% to US$2.10per share, suggesting that the declining revenue was a more crucial indicator than the forecast reduction in losses. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Peabody Energy at US$3.00 per share, while the most bearish prices it at US$0.90. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. For example, we noticed that Peabody Energy's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 4.7%, well above its historical decline of 4.4% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 9.1% per year. Although Peabody Energy's revenues are expected to improve, it seems that the analysts are still bearish on the business, forecasting it to grow slower than the wider industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Even so, earnings per share are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on Peabody Energy. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Peabody Energy going out to 2023, and you can see them free on our platform here..
Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Peabody Energy that you should be aware of.
If you decide to trade Peabody Energy, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.