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Peabody Energy Corp. earnings slide but still beat expectation

by SHENG Xin

Peabody Energy Corp.’s profits have come under pressure in recent quarters because of unfavorable industry conditions. 

Peabody Energy earnings beat expectations

by Xin SHENG
Apr 18, 2013

Peabody Energy Corp. shares surged after the coal company, benefiting from a cost-cutting effort that helped offset soft industry conditions, reported a smaller-than-expected first-quarter loss Thursday.

In the latest quarter, the company had a net loss of $23.4 million, or 9 cents a diluted share; that’s in sharp contrast to the year-ago quarter, when Peabody had net income of $172.7 million, or 63 cents per diluted share.

Revenue fell 13.5 percent to $1.75 billion from $2.02 billions last year.
The world’s biggest private-sector coal company said its loss from continuing operations was 5 cents per share in the latest quarter; analysts surveyed by Yahoo! Inc. had been expecting a deeper deficit of 15 cents per share

In New York Stock Exchange trading, Peabody Energy Corp. shares climbed $1.44, or 7.6 percent, to close at $20.46.

“Peabody’s first quarter results reflect the success of strong cost containment programs across the global platform, ” Chairman and Chief Executive Officer Gregory H. Boyce said in a prepared statement.

“We continue to aggressively reduce costs, exercise capital discipline, maximize cash lows and reduce debt,” he added.

Peabody’s sales are affected by global energy demand, and the company’s shares have come under pressure from concerns about a possible slowdown in China’s economy, as well as low natural-gas prices that have caused some U.S. utilities to shutter coal-fired generating facilities.

“It was a solid quarter helped by better cost control,” JPMorgan Chase & Co. analyst John Bridges said in a research note Thursday. “Peabody delivered a relatively strong quarter helped by higher realized prices and cost containment efforts.”

The latest quarter’s earnings beat” was “driven by better-than-expected costs in Australia and strong margins in the Illinois Basin,” said Paul S. Forward, an analyst from Stifel, Nicolaus & Co. Peabody has major coal-production operations in both those regions.

“Better cost performance was the major surprise,” Sterne Agee analyst Michael S. Dudas said in e-mail interview. Dudas said he is “Increasingly more optimistic” that Peabody’s recovery could strengthen during 2013.

“Shares had been oversold heading into quarter as global commodity stocks reacted to global slowdown fears,” Dudas continued, adding that rising natural-gas prices have been giving the coal sector a boost lately.

The St. Louis-based company said it expected second quarter result in a range between a 25-cent-loss and a one-cent-a-share profit.

Industry conditions are improving because “U.S. coal demand is rebounding, Chinese and Indian coal imports are rising, and additional production rationalization and project delays are taking place,” CEO Boyce said.