Peabody Energy Corporation (BTU): A Bull Case Theory

We came across a bullish thesis on Peabody Energy Corporation on valuedontlie.com. In this article, we will summarize the bull’s thesis on BTU. Peabody Energy Corporation’s share was trading at $14.27 as of 19^th June. BTU’s trailing P/E was 5.29  according to Yahoo Finance.

Peabody Energy Corp (BTU) has remained rangebound for over two years, prompting renewed investor attention amid a transformative acquisition. The company, a major producer of thermal and metallurgical coal in the U.S. and Australia, is acquiring four met coal mines from Anglo American for $2.3 billion plus earnouts—nearly matching its $2.7 billion market cap. This deal significantly reshapes BTU’s profile, potentially shifting met coal to two-thirds of its EBITDA by 2026.

Historically, two-thirds of EBITDA came from thermal coal, but the Anglo assets—three operating mines producing 11.2 million tons annually, alongside BTU’s Centurion project and the potentially restarted Grosvenor mine, could add up to $1.2 billion in met coal EBITDA alone. Management touts attractive deal economics, estimating the purchase at 3.1x EBITDA post-synergies. However, this shift comes with leverage and deferred shareholder returns.

Net debt is projected to rise to $1.65 billion post-close, making BTU the only coal major with net debt, while capex for mine development remains high. Analysts peg 2026 EBITDA from core operations at $865 million, with another $400 million from new project optionality. On an EV of $4.35 billion, BTU trades at 2.7x 2026 EBITDA, dropping to 2.2x if upside options are realized without further debt.

A 3.5x multiple on core EBITDA yields a $33 share price (+50%), or $44 at $2 billion EBITDA. However, execution risk is high due to volatile coal prices, heavy fixed costs, and the timing of cash flow realization. BTU resembles a leveraged bet on stable coal markets—compelling, but high stakes.

Previously, we covered a bullish thesis on Peabody Energy Corporation (BTU) by Hugo Navarro in January 2025, which highlighted the company’s strategic acquisition and upside potential from rising metallurgical coal prices. The company’s stock price has depreciated by approximately 24% since our coverage. This is because coal prices weakened and sentiment turned cautious. The thesis still stands as supply constraints persist. Value Don’t Lie shares a similar view but emphasizes execution risk and capital structure.

Peabody Energy Corporation is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 42 hedge fund portfolios held BTU at the end of the first quarter, which was 41 in the previous quarter. While we acknowledge the risk and potential of BTU as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

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