NEW YORK, Aug. 31 /PRNewswire/ -- Peabody Energy (BTU: $43) has been picked by Standard & Poor's Equity Research as its Focus Stock of the Week. BTU carries S&P's highest investment recommendation of 5-STARS, or Strong Buy.
"Following an overall decline in 2009, we believe the coal industry is experiencing a sustained recovery and that Peabody will benefit more than most from this rebound," said Mathew Christy, Coal Industry Equity Analyst at Standard & Poor's Equity Research. "We view positively the significant reduction in thermal coal inventory levels at utilities in the U.S., presently at about 53 days of consumption versus a long-term average of 50 days. We think this will help lead to sustained higher demand and greater contract pricing leverage for Peabody and the coal mining industry. In addition, we note that steel production, and hence the demand for metallurgical coal, has strengthened since bottoming in late 2009."
Christy views Peabody as one of the strongest competitors in the coal mining industry, largely due to the company's operating scale and direct international exposure. He observes that coal mining is a capital-intensive business and believes that Peabody's size and scale provide it with financial and cost advantages not afforded to its competitors. He also views positively the company's international exposure, including its wholly owned mines in Australia and other operations, such as a joint venture to develop Mongolian coal mines.
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S&P Global STARS Distribution
In North America
As of June 30, 2010, research analysts at Standard & Poor's Equity Research Services North America recommended 38.2% of issuers with buy recommendations, 52.2% with hold recommendations and 9.6% with sell recommendations.
As of June 30, 2010, research analysts at Standard & Poor's Equity Research Services Europe recommended 35.7% of issuers with buy recommendations, 40.7% with hold recommendations and 23.6% with sell recommendations.
As of June 30, 2010 research analysts at Standard & Poor's Equity Research Services Asia recommended 45.3% of issuers with buy recommendations, 48.3% with hold recommendations and 6.4% with sell recommendations.
As of June 30, 2010, research analysts at Standard & Poor's Equity Research Services globally recommended 38.4% of issuers with buy recommendations, 49.8% with hold recommendations and 11.8% with sell recommendations.
5-STARS (Strong Buy): Total return is expected to outperform the total return of a relevant benchmark, by a wide margin over the coming 12 months, with shares rising in price on an absolute basis.
4-STARS (Buy): Total return is expected to outperform the total return of a relevant benchmark over the coming 12 months, with shares rising in price on an absolute basis.
3-STARS (Hold): Total return is expected to closely approximate the total return of a relevant benchmark over the coming 12 months, with shares generally rising in price on an absolute basis.
2-STARS (Sell): Total return is expected to underperform the total return of a relevant benchmark over the coming 12 months, and the share price is not anticipated to show a gain.
1-STARS (Strong Sell): Total return is expected to underperform the total return of a relevant benchmark by a wide margin over the coming 12 months, with shares falling in price on an absolute basis.
Relevant benchmarks: In North America, the relevant benchmark is the S&P 500 Index, in Europe and in Asia, the relevant benchmarks are generally the S&P Europe 350 Index and the S&P Asia 50 Index.
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