PEABODY ENERGY CORP (BTU): what the price assumes

boothcheck covers PEABODY ENERGY CORP (BTU) but does not put one priced-in number on it: here the defensible answer is the evidence rather than a point estimate. boothcheck publishes no house fair value, target price, or buy/sell rating. Narrative composed 2026-07-25.

Generated: 2026-09-07 · Exported: 2026-09-09 · Source: https://boothcheck.com/report/BTU

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 10.7% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: n/a

Valuation X-Ray

The price is supported by asset-based value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Asset

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.5%); the inversion above states its own rate.

Per-Model Detail (n=8)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Leverage and coverage are computed on normalized mid-cycle operating income (mid-cycle margin 11.2%); the trailing year was depressed.

Bullet Takeaways

• Thermal coal is 72% of revenue and metallurgical coal 27%, and the last twelve months ran at an operating margin of about -3.5% against a through-the-cycle figure near 11.2%, which is what the bottom of a commodity cycle looks like from the inside.
• The largest near-term uncertainty is execution rather than price: commissioning of the Centurion longwall in Australia was extended on equipment and roof-control problems, with second-half sales targeted at nearly 2 million tons.
• Second-quarter results are due on 29 July 2026, the first print that shows whether Centurion is running at rate, and the U.S. thermal book behind it now supplies a coal fleet whose share of generation "increased to approximately 16% for the year ended December 31, 2025".

Bull Case

The shares change hands for less than the book value of the mines behind them. The accounts carry book value near 28.65 dollars a share; the stock trades at $22.80. The market is currently valuing Peabody's reserves, terminals and washplants at a discount to what the accounts say they cost. That is a starting point, not an argument, but it tells you which direction the burden of proof runs.

The accounts show no distress at all, which is unusual for a trough. Available liquidity was 942.1 million dollars at the end of 2025, down from 1,072.5 million a year earlier, so the drawdown through a loss-making year was modest. Through-cycle earnings cover the interest bill about 9.8 times over, the company is not burning cash, and the share count has come down about 2.7% a year since March 2022. A cyclical business that keeps buying its own stock while reporting a loss is making a statement about how it reads the cycle, and it is putting cash behind the statement.

The cycle itself is the thing to size. Peabody's own through-the-cycle operating margin is about 11.2%. The trailing twelve months delivered about -3.5%. The gap between those two numbers is not a business problem; it is a price problem, and coal prices are set by weather, gas, freight and Chinese steel output rather than by anything management does. For reference, ARLP is currently running a 14.4% operating margin and HCC 9.7%, so the assets in this industry can and do earn double-digit returns when the price cooperates.

Thermal demand, meanwhile, has stopped doing what almost everyone assumed it would. The 10-K reports that U.S. electricity demand rose more than 2% in 2025 and that generation from thermal coal increased year over year, "driven by higher natural gas prices and stronger total generation", with coal's share of the generation mix rising to roughly 16%. Load growth is arriving faster than replacement capacity, and the marginal megawatt has to come from somewhere. That does not make coal a growth industry. It does mean the runway is longer than the consensus retirement schedule implied.

On the metallurgical side the growth is company-specific. Centurion is a new Australian longwall ramping toward full production, with second-half sales targeted at nearly 2 million tons. Met coal sells into steelmaking rather than power generation, which is a structurally different demand curve, and it is where 27% of revenue already sits.

The most instructive capital decision of the last two years was the one Peabody declined to make. It had signed definitive agreements in November 2024 to buy Anglo American's steelmaking coal portfolio for about $3.78 billion, then served notice of a material adverse change after the 31 March 2025 ignition event closed the Moranbah North mine, and walked. Anglo returned "$ 29.0 million of the $ 75.0 million deposit previously paid by Peabody" and Peabody has demanded the rest. Paying nearly four billion dollars for a portfolio whose largest mine had stopped producing, with no timetable for restart, would have been the easy institutional choice. Not doing it cost a deposit and preserved the balance sheet.

Bear Case

The price is a bet on one specific number coming back: the through-the-cycle operating margin of about 11.2%. Every valuation frame in use here reaches today's price, and none of them says the stock is expensive. So the bear case cannot be an overvaluation argument. It has to be an argument about why a cheap-looking coal company deserves to look cheap, and about which of the assumptions folded into that mid-cycle number is the one that does not hold.

Start with what the mid-cycle number assumes. It assumes cycles. A cycle implies a return to a prior level, and 72% of Peabody's revenue comes from thermal coal, where the demand curve is not obviously cyclical at all but rather a slow structural decline punctuated by weather and gas prices. The last twelve months at about -3.5% may be a trough. It may also be a waypoint. Nothing in the trailing data distinguishes the two, and the price is paying for the first reading.

The capital markets have already made their own judgment on that question, and the filing says so directly: certain banks, financing sources and insurers "have limited financing and insurance coverage for the development of new coal-fueled power plants and for coal producers and utilities that derive a majority of their revenue from coal". When a company's cost of capital rises for reasons unconnected to its cash flows, the discount is not a mispricing to be arbitraged. It is a permanent feature of the security.

Exposure to the price itself is close to unhedged. Half of Peabody's seaborne sales volume in 2025 sat under contracts running less than a year, so the realised price resets fast in both directions. The company also warns that "it is reasonably possible that coal prices may decrease and/or fail to improve in the near term", with the consequence being adjustments to the carrying value of long-lived mining assets. That is the book value the bull case leans on, and management has flagged it as impairable.

Execution is currently the swing factor, and it is going the wrong way. Centurion's commissioning was extended on equipment and roof-control problems, with second-quarter sales volume of only about 300,000 tons expected as the ramp continues. Underground longwall development is where mining companies most reliably discover that geology does not read the capital plan. Alongside it sits the Anglo dispute: Peabody terminated the purchase agreements, Anglo returned only part of the deposit, and the counterparty has taken the matter to arbitration on the view that no material adverse change occurred. The outcome is binary, the timing is not in Peabody's hands, and the 10-K names the termination as something that "could adversely affect the Company's business, results of operations, and its financial condition".

Nothing in the balance sheet argues against any of this, because the balance sheet is not where the risk lives. Off the operating business, Peabody holds around 44 million dollars of equity stakes, about 1.6% of its market value, so the downside boundary they provide rounds to nothing. The comfort is elsewhere: the company holds more liquid assets than borrowings and covers its interest bill many times over on through-cycle earnings. What that buys is time to wait, which is exactly the right asset if the cycle turns and exactly the wrong one if it does not.

Valuation

Read the price as a multiple of what this business earns in an average year rather than a bad one, and it comes to roughly 6.4 times mid-cycle operating income. That is low enough to sit below what a steadily declining stream of operating profit would warrant, which is an unusual place for a stock to trade. The market is not asking Peabody to grow. It is not even asking it to hold flat.

The disagreement among the methods is notable mostly for its absence. The asset-value lens lands above the price, the peer-multiple lens far above it, and the earnings-power and forward cash-flow methods land within a few percent of it. There is no family here saying the price is too high. That combination usually appears in one of two situations: a genuine mispricing, or a business the market believes has a shorter life than any of those methods assume. Coal is the archetype of the second case, so the pattern is information about the methods as much as about the stock.

What the static methods cannot see is terminal value. Every one of them takes today's asset base and today's normalised earnings and extends them forward on the assumption that a business that exists continues to exist. For a company where 72% of revenue comes from thermal coal and 27% from metallurgical, the honest question is not what the mines earn in a normal year but how many normal years remain. The discount is answering exactly that, and no valuation method in the standard toolkit prices it.

The specific gap worth holding in view is between the two margin figures. Through the cycle Peabody has earned about 11.2% at the operating line. The trailing twelve months produced about -3.5%. Peers show the same dispersion: ARLP at 14.4%, HCC at 9.7%, and CNR at -2.3%, which is a sector in a trough rather than a company in trouble. It also means there is no self-help lever. Peabody's margin recovers when coal prices recover, and not otherwise.

The balance sheet is the reason the wait is affordable. Available liquidity stood at 942.1 million dollars at the end of 2025, the company carries more liquid assets than borrowings, through-cycle earnings cover the interest bill about 9.8 times over, and there is no cash burn. The share count has fallen about 2.7% a year since March 2022, so what cash the trough has produced has partly gone into retiring equity rather than defending it. For a cyclical at the bottom, solvency is not a footnote to the valuation. It is the thing that determines whether the holder gets to find out who was right.

Catalysts

Second-quarter results are scheduled for 29 July 2026. The comparison they land against is unflattering: first-quarter 2026 produced a net loss of $32.4 million, or $0.27 a diluted share, against net income of $34.4 million and $0.27 a share in the same quarter a year earlier, with adjusted EBITDA of $82.5 million versus $144.0 million. That is the trough showing up in the reported numbers rather than in commentary.

Centurion is the item with the most operational leverage in the print. Commissioning was extended on temporary equipment and roof-control challenges, with roughly 300,000 tons of sales volume expected in the second quarter and commissioning largely complete by the end of it, building toward nearly 2 million tons of second-half sales. A longwall either reaches rate or it does not, and the second-half target only works if the first half's problems are behind it.

The Anglo American matter is the open legal item. Peabody terminated the November 2024 purchase agreements in August 2025 after declaring a material adverse change at Moranbah North; Anglo returned $29.0 million of the $75.0 million deposit, disputes that any material adverse change occurred, and has taken the dispute to arbitration. Neither the timing nor the outcome sits with Peabody, and the remaining deposit is the smaller part of what is at stake.

Peer Cohorts (Per Segment, With Filing Citations)

Seaborne Thermal / Powder River Basin / Other U.S. Thermal (reported)

• ARLP (ALLIANCE RESOURCE PARTNERS LP)
• FY2025 10-K: …450 to 650 feet across the reserve. The table below summarizes mineral reserves as of December 31, 2025 using a cut off thickness of 4.00 feet: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quality, Washed, Dry Basis ​ % Recovery ​ Reserves ​ Tons (in millions) ​ Thickness (ft) ​ ​ ​ % Ash ​ ​ ​ % Sulfur ​ ​ ​ Btu ​…
• FY2025 10-K: …Bitiki KY, LLC, an indirect wholly owned subsidiary of ARLP ​ Bituminous coal Coal used primarily to generate electricity and to make coke for the steel industry with a heat value ranging between 10,500 and 15,500 Btus per pound. ​ BLBA Federal Black Lung Benefits Act ​ Bluegrass Minerals Bluegrass Minerals…
• CNR (Core Natural Resources, Inc.)
• FY2025 10-K: …our current estimates. After the Merger, our presence in the metallurgical coal market includes two longwall mines in the Leer Complex and three continuous miner mines, Beckley, Mountain Laurel and Itmann, all of which are in West Virginia. These mines produce a premium metallurgical product used in the global steel…
• FY2025 10-K: …terminal ownership, dual rail access, geographic diversity and advanced loadout infrastructure, constitute a core strategic advantage. These assets enable the Company to reliably deliver large volumes of coal to a global customer base, optimize costs and flexibly respond to shifting market dynamics, securing its…
• NRP (NATURAL RESOURCE PARTNERS LP)
• FY2025 10-K: …will remain consistent with Sisecam Wyoming's cost of products sold for the five years ended December 31, 2025; • the weighted average net sales per short ton FOB plant, $150/ton, based on USGS pricing and historical pricing provided by Sisecam Wyoming; • Sisecam Wyoming's mining costs will remain consistent with the…
• FY2025 10-K: …While carbon sequestration rights and ownership continue to evolve, we believe we own one of the largest inventories of acreage with potential for carbon sequestration activities in the United States. Renewable Energy. In addition, we believe portions of our asset base across the United States possess the geologic…

Seaborne Metallurgical (reported)

• HCC (Warrior Met Coal, Inc.)
• FY2025 10-K: …customer base of blast furnace steel producers, primarily located in Europe, South America and Asia. We have a shipping time and distance advantage serving customers throughout the Atlantic Basin relative to competitors located in Australia and Western Canada. Our strategic location is enhanced by our long-tenured,…
• FY2025 10-K: …December 31, 2024. Overview We are a U.S.-based, environmentally and socially minded supplier to the global steel industry. We are dedicated entirely to mining non-thermal steelmaking coal used as a critical component of steel production by metal manufacturers in Europe, South America and Asia. We are a large-scale,…
• CNR (Core Natural Resources, Inc.)
• FY2025 10-K: …Diverse Product Qualities to Access Growing Export Metallurgical and Industrial Markets while Preserving the Revenue Visibility Provided by Coal Sales to Rail-Served Power Plants in Strategic Markets We plan to minimize our market risk and maximize realizations by continuing to focus on placing a significant portion…
• FY2025 10-K: …(ii) valuable relationships with customers, railroads and other participants across the coal industry, (iii) technical wherewithal and demonstrated success in developing new applications and customers for our coal products in industrial, metallurgical and electric power generation markets and (iv) a proven track…
• NRP (NATURAL RESOURCE PARTNERS LP)
• FY2025 10-K: …will remain consistent with Sisecam Wyoming's cost of products sold for the five years ended December 31, 2025; • the weighted average net sales per short ton FOB plant, $150/ton, based on USGS pricing and historical pricing provided by Sisecam Wyoming; • Sisecam Wyoming's mining costs will remain consistent with the…
• FY2025 10-K: …and today the company is $50 billion in assets with 350 branches in 9 states and trades on the NYSE (CADE). Previously, Mr. Murphy spent 20 years at Amegy Bank of Texas, helping to steer that institution from $75 million in assets and a single location to assets of $11 billion and 85 banking centers at the time of…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.