On Friday analysts at Bank of America Merrill Lynch reaffirmed its rating on Peabody Energy Corporation (BTU) while also cutting its price target for the coal company.

The analysts give BTU an “Underperform” rating and lowered the price target from $22 to $20. The new price target is a -27.7% downside from Friday’s closing price of $27.68.

An Bank of America Merrill Lynch analyst noted, “Our 2013E EPS falls sharply to reflect guidance of higher-than-expected costs at its Australian coal ops and lower volumes overall. We now model 2013 EPS of $0.60 from $1.30 and 2014 at $1.75 from $2.50. BTU said in a release 2013 Australian costs would rise 5% y/y, with Q1 up 10% from ytd levels, U.S. thermal volumes were seen down 8-12M tons y/y to 180-190M tons, and Australian volumes were guided up 2-3M tons y/y to 33-36M tons. BTU expected Q1 would be trough earnings for 2013 on the view that met prices recover and costs ease.”

Peabody Energy shares were up 20 cents, or +0.72%, in premarket trading on Monday.

The Bottom Line
Shares of Peabody Energy (BTU) have a 1.23% dividend yield, based on Friday’s closing stock price of $27.68. The stock has technical support in the $22-$25 price area. If the shares can firm up, we see overhead resistance around the $29-$30 price levels.

Peabody Energy Corporation (BTU) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.0 out of 5 stars.

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