Goldman Sachs Reiterates Buy Rating, $77 PT On BTU

Goldman Sachs reports that it expects Peabody Energy Corporation BTU to reverse 16% underperformance vs. peers as investors gain confidence flood impacts should not persist beyond 1H11. “We viewed BTU's update of Queensland operations positively: (1) all met coal mines are operating, with 2 of 3 already near normal rates; and (2) initial 2011 volume guidance was up vs 2010,” Goldman Sachs writes. “We reiterate our Buy rating on BTU as we believe it has the best combination of growth opportunities, returns, FCF and catalysts for EPS upside under coverage, trading at 5.6x 2- year rolling forward EV/EBITDA vs a 6.8x historical average, 7.3x for CNX and 5.4x for ACI. “We update estimates for primarily for volumes/costs, but our $77 6-month target price (28% return) remains unchanged.” Peabody Energy Corporation closed Tuesday at $60.50.