Peabody Energy (BTU) Extends Rally Amidst Growing Energy Demand and AI Infrastructure Buildout

Peabody Energy Extends Gains Amidst Robust Energy Demand

Peabody Energy Corp. (NYSE:BTU) experienced an 8.22% increase in its stock price, reaching $25.81 per share. This marked the eighth consecutive trading session of gains for the coal producer, indicating sustained positive investor sentiment. The company's trading volume stood at $0.24 billion, ranking 420th in market activity.

Catalysts Driving Performance

The significant rally in Peabody Energy shares is primarily attributed to a confluence of factors, including expectations of stronger energy demand during the upcoming cooler fourth quarter and the escalating power requirements of the artificial intelligence (AI) sector's data centers. The company also expanded its $1 billion share buyback program and raised its full-year guidance, contributing to investor confidence. Peabody's Q2 earnings highlighted operational strength with $93 million in adjusted EBITDA and a robust $586 million cash balance. The termination of the $3.8 billion Anglo American acquisition due to a mine fire preserved liquidity and removed a degree of uncertainty. Management emphasized disciplined capital allocation, focusing on cost reductions and organic growth initiatives, such as the Centurion metallurgical coal mine.

Market Dynamics and AI's Energy Footprint

Global coal demand has demonstrated resilience, supported by U.S. grid reliability needs and China's supply constraints. Peabody has also benefited from tax credits for metallurgical coal and reduced federal royalties, enhancing profitability. The rapidly expanding AI sector is emerging as a substantial driver of electricity demand. UBS Global analysts highlight that the market may be underestimating the scale of this trend.

"NVIDIA's $100 billion agreement with OpenAI, aimed at supporting OpenAI's data center buildout and other AI infrastructure, implies substantial power requirements, equivalent to the needs of over 8 million US households."

NVIDIA projects global AI data center infrastructure spending could reach $3-4 trillion annually by 2030, leading to a projected 170 GW increase in global electricity demand, with 110 GW in the U.S. alone. This necessitates massive investment, estimated at $220 billion for U.S. capacity and $340 billion globally, excluding transmission infrastructure.

The International Energy Agency (IEA) forecasts global data center electricity consumption to more than double by 2030, with AI as the most significant driver, adding more than Japan's entire consumption each year. This demand growth is expected to be met significantly by both natural gas and coal-fired generation, with coal currently being the largest source for data centers globally, particularly in China.

Analyst Perspectives and Future Outlook

The positive sentiment surrounding Peabody Energy is reflected in recent analyst revisions. B. Riley increased its price target for BTU from $18.00 to $24.00, maintaining a "Buy" rating. The firm also provided positive earnings per share (EPS) estimates for FY2026 at $3.99 and FY2027 at $4.74. Other firms, including UBS Group, have also adjusted price targets, though with more neutral ratings. The consensus rating for Peabody Energy stock among analysts is "Moderate Buy," with an average price target of $23.67. Peabody's low debt-to-equity ratio (0.09) and $1 billion liquidity cushion are seen as key financial strengths.

Looking ahead, Peabody Energy has set ambitious Q3 2025 targets, including 3.9 million tons for seaborne thermal volume (2.7 million export tons) and 2.2 million tons for seaborne metallurgical volume. The company plans to raise full-year guidance for both Seaborne Thermal and Powder River Basin volumes while reducing cost-per-ton targets across its segments. While the long-term energy transition presents challenges for coal, near-term policy support, strategic execution, and the burgeoning energy demands from the AI sector position Peabody Energy to capitalize on cyclical demand. The focus on affordable, reliable energy and steel production underscores the company's role in the evolving energy landscape.