Markets
BTU

Why Peabody Energy Corporation's Stock Fell Nearly 50% Last Month

After a 125% advance in August, stock fell an equally dramatic 50% (OK, 49.3%) in September. To suggest the international coal giant's stock has been volatile of late would be a massive understatement.

What: After a 125% advance in August, Peabody Energy Corporation's stock fell an equally dramatic 50% (OK, 49.3%) in September. To suggest the international coal giant's stock has been volatile of late would be a massive understatement.

So What? The last three months have been a roller coaster for Peabody shareholders. Down 32% in July, up 125% in August, and down 50% in September. (For the record, it's down about 22% over that three month span.) But volatility isn't surprising for a company that sits atop an out of favor commodity industry that's not only struggling on the pricing front but is also facing an existential crisis-basically, does the world want dirty coal in the energy mix anymore?

The answer to that question may not matter as much as whether the world needs coal in the energy mix, but the shift toward cleaner burning fuels is clearly starting to take place in key Peabody markets like the United States. And the Chinese economy starting to cool off doesn't help perceptions, since this global miner's Australian operations count that country as a key customer (perhaps the key customer is more appropriate). At the end of the day, coal pricing is still weak and Peabody's financial results are, too.

So while it's impressive that Peabody remains solvent while other coal miners are falling into bankruptcy, the long-term picture is still pretty cloudy. In other words, August's heady advance sure looks like it was a bit of irrational exuberance that was quickly corrected in September.

No what? The jury is still out on Peabody. Second quarter earnings, reported on the last day of July, showed things were bad, but not as awful as the results that some competitors are showing. But the coal market hasn't gotten better, so there's no reason to expect a performance upturn. While the miner looks like it will be a survivor and is doing the right things to get through this market downturn, the downturn isn't over yet. And until coal markets turn higher, Peabody's results will continue to suffer. Note that the 1 for 15 reverse stock split that took effect on October first may increase the price of the shares, but it does nothing to change Peabody's less then encouraging story.

The next billion-dollar iSecret

The world's biggest tech company forgot to show you something at its recent event, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here .

The article Why Peabody Energy Corporation's Stock Fell Nearly 50% Last Month originally appeared on Fool.com.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

Copyright © 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

BTU

Other Topics

Stocks

Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More