Coal mining company Peabody Energy (NYSE: BTU) met Wall Street’s revenue expectations in Q2 CY2026, with sales up 12.7% year on year to $1.00 billion. Its GAAP loss of $0.74 per share was 75.9% below analysts’ consensus estimates.
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Peabody Energy (BTU) Q2 CY2026 Highlights:
- Revenue: $1.00 billion vs analyst estimates of $1.00 billion (12.7% year-on-year growth, in line)
- EPS (GAAP): -$0.74 vs analyst expectations of -$0.42 (75.9% miss)
- Market Capitalization: $2.83 billion
"While second quarter results reflected temporarily lower volumes and higher costs, we are already seeing those impacts mitigate across our operations. We expect improved results in the second half of the year as performance at our flagship Centurion Mine achieves targeted production rates," said Peabody President and Chief Executive Officer Jim Grech.
Company Overview
Beginning with a single wagon hauling coal in Illinois back when Grover Cleveland was president, Peabody Energy (NYSE: BTU) mines coal used by electricity generators and steel manufacturers.
Revenue Growth
A company’s long-term performance can give signals about its business quality. Even a bad business, especially in a cyclical industry, can shine for a year or so, but a top-tier one should exhibit resilience through cycles. Over the last five years, Peabody Energy grew its sales at a tepid 7.6% compounded annual growth rate. This fell short of our benchmark for the energy upstream and integrated energy sector and is a poor baseline for our analysis.
Within Energy, a singular timeframe, even if it’s quite long-term, only sheds light on how well a company rode the last commodity cycle. To better assess whether a company compounds through cycles, we validate our view with an even longer, ten-year view. Peabody Energy’s performance shows it grew in the past five-year but relinquished its gains over the last ten years, as its revenue fell by 1.8% annually.
This quarter, Peabody Energy’s year-on-year revenue growth was 12.7%, and its $1.00 billion of revenue was in line with Wall Street’s estimates.
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Adjusted EBITDA Margin
Peabody Energy was profitable over the last five years but held back by its large cost base. Its average EBITDA margin of 25.6% was weak for an upstream and integrated energy business.
Analyzing the trend in its profitability, Peabody Energy’s EBITDA margin decreased by 30.3 percentage points over the last year. Peabody Energy’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.
in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.
Cash Is King
As mentioned above, adjusted EBITDA ignores capital structure and drilling expenditure decisions. These are two huge aspects of an Energy producer, so in order to understand a comprehensive picture of business quality, an investor needs to account for these. Said differently, adjusted EBITDA margins could be solid but free cash flow is abysmal because decline rates of the asset are extreme and the drilling is expensive. Free cash flow tells you about not only the economics of the production that has happened but how much it costs to stay in business as well (further drilling or extraction).
Peabody Energy has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 9.9% over the last five years, slightly better than the broader energy upstream and integrated energy sector.
The level of free cash flow is important, but its durability across cycles is just as critical. Consistent margins are far more valuable than volatile swings driven by commodity prices.
Peabody Energy’s ratio of quarterly free cash flow volatility to WTI crude price volatility over the past five years was 13.6 (lower is better), indicating that its cash generation is far more sensitive to commodity-price swings than most peers. This elevated volatility limits its access to capital in downturns and makes it unlikely to act as a consolidator when weaker competitors come under pressure.
You may be asking why we wait until the free cash flow line to perform this stability analysis versus commodity prices. Why not compare revenue or EBITDA to WTI in the case of Peabody Energy? Because what ultimately matters is not how much revenue or profit you earn when prices are high but how much cash you can generate when prices are low. Free cash flow is the superior metric because it includes everything from hedging prowess to growth and maintenance capex to management behavior during good times and bad.
Key Takeaways from Peabody Energy’s Q2 Results
We struggled to find many positives in these results. Overall, this was a softer quarter. The stock traded down 4.8% to $22.12 immediately following the results.
Peabody Energy didn’t show its best hand this quarter, but does that create an opportunity to buy the stock right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).
