Here's Why Peabody Energy Corporation's Stock Is Slumping Today

Peabody Energy Corporation gets kicked out of the S&P 400 index, which put downward pressure on shares.

Matthew DiLallo
Matthew DiLallo
Jun 24, 2015 at 3:14PM
Energy, Materials, and Utilities

What: Peabody Energy Corporation's (NYSE:BTU) beleaguered stock took another hit today, dropping nearly 10% by midafternoon. This sell-off was ignited by news that it was being kicked out of the S&P 400 index, without being moved to another index. With this latest sell-off, the stock is now down a devastating 85% over the past year.

So what: Typically, index changes don't mean a whole lot for investors. That said, index changes do move stock prices, as investors either bid up stocks being added to indexes or sell off those that are kicked out. However, in the case of Peabody Energy, the fact it's getting kicked out of an index and not being reassigned somewhere else is another sign of just how bad things are for the company and the coal industry at large.

This is as Peabody and its peers continue to struggle under high-legacy coal production costs, large debt burdens, and very weak coal prices. It's a devastating combination that has several coal producers teetering on the brink of bankruptcy.

Now what: The outlook doesn't look good for Peabody and its peers, which is something that S&P is reminding investors of by pulling the company out of its broader market indexes. At the moment there are no signs on the horizon that things will improve, giving investors little reason to hold Peabody's stock.