Whitehaven Coal Faces Decline After Barrenjoey Downgrade

August 23, 2024 01:28 PM AEST | By Team Kalkine Media

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Whitehaven Coal Faces Decline After Barrenjoey Downgrade — Image source: shutterstock

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Whitehaven Coal (ASX:WHC) has encountered a notable decline in its share price, falling by as much as 7% to $7.02 following a downgrade by Barrenjoey.

Glyn Lawcock, an analyst at Barrenjoey, has revised Whitehaven’s investment rating from Overweight to Neutral. This change is driven primarily by valuation considerations, as Whitehaven is now trading at around 4 times the estimated FY25 EV/EBITDA ratio. This valuation aligns with the company's net present value, indicating that the stock's current price accurately reflects its projected earnings.

The recent earnings report from Whitehaven revealed a shortfall compared to market consensus. Despite this, the company’s final dividend was notably higher than what the market had anticipated. Lawcock points out that the most significant positive development in the results was the sale of a 30% interest in the Blackwater mine, which fetched $US1.08 billion. This transaction was a highlight of the earnings report, providing a boost to the company's financial position.

However, the company's guidance for FY25 has been disappointing. Projections indicate a decrease in volumes and an increase in unit costs, leading to a substantial 48% cut in the forecasted earnings per share (EPS) for FY25. Lawcock suggests that the reduction in EPS estimates could be even more pronounced, as further downward adjustments to consensus estimates may occur.

For those tracking Whitehaven Coal's market performance and financial health, these developments are crucial. Monitoring updates on the company’s financial metrics and strategic decisions will be essential in assessing its future trajectory.

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