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Raymond James upgrades Peabody as bargain stock

NEW YORK (AP) -- A Raymond James analyst upgraded Peabody Energy Corp. on Tuesday to "Outperform," saying that the coal producer's prospects should improve after the current quarter.

Coal stocks have lost ground since the beginning of the year due to weak demand and competition from cheap natural gas in the U.S. Peabody shares have performed even worse than many other coal stocks.

THE OPINION: "Peabody has taken it on the chin recently, underperforming its peers, the index and the broader market as a whole," Raymond James analyst James M. Rollyson wrote in a note to clients. But he said that with quarterly earnings likely to hit a low point this quarter and better prospects of natural gas helping coal, "we view this as an attractive entry point into a high quality, core coal holding."

Rollyson set a $25 price target on the shares. He did not change his estimates of earnings for 2013 and 2014. Analysts surveyed by FactSet expect Peabody to post 2013 adjusted earnings of 37 cents per share on revenue of $7.72 billion.

THE SHARES: Up 19 cents to $20.99 in midday trading. Over the past year, the stock has ranged from a high of $31.97 last May to a low of $18.78 in July. It's fallen 22 percent in 2013 through Tuesday's opening bell.