Peabody Energy corporation

Peabody Energy corporation (NYSE: BTU) mines and sells coal through approximately 21 coal mines in the United States and Australia. Peabody also markets and brokers coal, both as principal and agent, and trades coal and freight-related contracts through offices in China, Australia, the United Kingdom, and the U.S.

Key Updates:

• Joint Venture with Riverstone Credit Partners: Recently, the company collaborated with Riverstone Credit Partners and would pursue the development of over 3.3 GW of solar PV and 1.6 GW of battery storage capacity over the next five years. The operations would be conducted with R3 Renewables LLC, and the group would be engaged in the development of six potential sites on large tracts of land on or near previous coal mining operations in Indiana and Illinois.

• Lower profitability margins: At the end of FY21, the company reported its gross margin and EBITDA margin of 23.1% and 19.2%, respectively, as compared to the industry median of 57.8% and 35.6%, respectively. This indicates weak cost management and remains as a key concern. Operating margin also stood lower at 14% in FY21, as compared to the industry median of 15.7%.

• Lower Sales volume: The company reported its seaborne thermal sales of 4.6 million tonnes and 17.3 million tonnes, respectively in Q4FY21 and FY21, respectively, as compared to 5.2 million tonnes and 19 million tonnes in Q4FY20 and FY20, respectively. Continuation of the above trend might dampen the company’s upcoming performance.

Stock Recommendation:

During the fourth quarter of FY21, the company operations were adversely impacted by heavy rainfall in the Hunter Valley associated with the La Niña weather pattern and continued COVID related staffing shortages. The stock of BTU is available at a higher valuation of price to cash flow multiples of 5.0x on TTM basis, as compared to the industry (Coal) median of 3.9x. Hence, considering the aforesaid facts, we give a ‘Watch’ rating on the stock of BTU at the closing price of USD 22.57 on March 08, 2022.

1-Year Technical Price Chart (as on March 08, 2022). Source: REFINITIV, Analysis by Kalkine Group

Note: Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Lemonade Inc.

Lemonade Inc. (NYSE: LMND) operates in the insurance industry and offers digital and artificial intelligence-based platform for various insurances and for settling claims and paying premiums. The platform ensures transparency in issuing policies and settling disputes.

Key updates:

• Reported higher income: In Q4FY21, the company reported its revenue of USD 41 million, increased from USD 20.5 million in pcp. The growth was driven by the increase of gross earned premium during the quarter, increases in net investment income & commission income.
• Surge in operating expense: In Q4FY21, the company reported an 89% y-o-y surge in total operating expenses to USD 84.5 million, due to increased investment in advertising and employee-related expenses in order to support growing operations.
• Increase in customer-base: At the end of Q4FY21, the company reported its customer base of 1,427,481, which is significantly higher than 1,000,802 in pcp.
• Reported higher net loss: The company reported its net loss of USD 70.3 million in Q4FY21, which is significantly higher than USD 33 million in pcp. This was primarily due a higher loss ratio on account of increased sales of the newer products (home, pet), coupled with an increased pace of hiring to support our recent launch of Lemonade Car, and greater growth marketing spend.

Stock Recommendation:

Despite a solid top-line growth, the company failed to retain the momentum and reported higher net loss due to rising loss ratio. Notably, the company’s FY21 loss ratio stood higher at 93%, which is significantly higher than the industry median of 64.9%. The stock of LMND is trading at a rich valuation of EV to Sales multiples of 8.8x on a TTM basis, as compared to the industry (Insurance) mean of 2.5x. Moreover, the stock is trading in a downtrend since November 2021, and corrected ~57% and ~73% in the last three months and six months, respectively, which indicates higher selling pressure. Considering the aforesaid facts, we give a ‘Watch’ rating on the stock of LMND at the closing price of USD 20.63 on March 08, 2022.

1-Year Technical Price Chart (as on March 08, 2022). Source: REFINITIV, Analysis by Kalkine Group

Note: Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

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