In his The Ticker Tape Digest, he explains, "The stock rose above its break points of $81.20, hitting a new high." He adds, "With net set to surge 70% this year, we see an upside target of $105 per share."
"Peabody, based in St. Louis, is a major producer of coal with annual revenues of $4.7 billion. BTU's coal fuels more than 10% of U.S. electricity generation and 2% worldwide.
"The company has mining operations in Appalachia, the Powder River Basin, and the U.S. Southwest and Midwest, as well as Australia and Venezuela. It also markets, brokers, and trades coal, and develops electricity-generation projects.
"Technically, BTU has broken out from a six-week flat base today with expanding volume. It is part of the strong coal group, which has been one of the strongest acting sectors of the market.
"The stock is a leader, having as appreciated 60% the past 12 months compared with a 10% drop in the S&P 500 index. The long-term chart shows that BTU went into an up trend back in 2003 - the start of a bull market. It went through a consolidation in late 2006 and 2007. Now it is on the move higher again.
"The daily chart shows that BTU drove higher from around 50 in March. The stock got up to about 80, where it put down its base. The base -- although brief at six weeks -- is well structured. The stock was making higher lows on each pull back within the base. That is bullish.
"The breakout comes in tandem with the rise in the coal sector today. So, the stock is participating nicely in the group strength. The stock's momentum indicator backed off in recent weeks, so it will be important to see if BTU can follow through with volume on its breakout.
"We rate BTU a very good intermediate-term play because of its excellent earnings outlook through 2009. This year, analysts predict BTU's profits will soar 70% to $2.65 a share from $1.56 a share a year ago.
"The stock sells with a price-earnings ratio of 31. That would seem high for a coal stock. However, next year, the Street sees profit growth accelerating to 83% with profits climbing to $4.86 a share. Based on 2009, net the stock has a p/e ratio of 17.
"Net for the next two quarters will show a significant acceleration in growth. Profits for the second quarter should rise 36% and then for the third quarter 613%. For the upcoming second quarter net should be 54 cents a share, up from 40 cents a year ago.
"The highest estimate on the Street is at 76 cents a share. The highest estimate gives a hint that some are looking for a big quarter. Net for the third quarter should soar to 86 cents a share from 12 cents a year ago.
"The breakout against a weak market is impressive. We are targeting BTU for a move to 105 within the next few months. There is a chance for a stock split which could boost the stock. A protective stop can be placed near 77 and should be honored.
"Meanwhile, institutional sponsorship is excellent. One of the largest fund buyers lately was 5-star rated Fidelity Leveraged Company Stock Fund which purchased 600,000 shares. Also, 4-star rated Ivy Global Natural Resources Fund picked up 900,000 shares. The largest fund holder is Fidelity Magellan Fund, 4-star rated, with a 2.7% stake. It has held its position steady."
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