Peabody Energy announces better-than-expected Q2 numbers

The coal miner said demand for steel-making coal drove higher sales from its Australian mines.

NEW YORK (Reuters)  - 

Coal miner Peabody Energy Corp (BTU.N: Quote) reported a second-quarter profit on Tuesday that beat Wall Street estimates as demand for steel-making coal drove higher sales from its Australian mines.

The company also raised the low end of its earnings estimates for this year, citing strength in international coal markets, with rising imports in China, India and other parts of Asia for both steel-making metallurgical coal and thermal coal which is used in power generation.

But revenue came in slightly lower than expected, and Peabody shares rose less than 1 percent.

"Australian thermal coal prices are running more than 40 percent ahead of the prior year and are above the prices at the beginning of both the first and second quarters," Peabody said in its earnings release.

"Benchmark metallurgical coal prices for the third quarter have settled more than 12 percent above second quarter agreements," it said.

In U.S. markets, it said that while coal demand is increasing, production is running an estimated 3 percent below 2009 levels, leading to higher prices.

Brean Murray Carret & Co analyst Jeremy Sussman characterized Peabody's earnings as a solid beat.

"On the operating side, Australia was the main factor, with very strong realized prices," he told Reuters.

The St Louis-based company, which operates mines in the United States and Australia, said income from continuing operations was $214.7 million, or 76 cents per share, compared with $90 million, or 32 cents per share, a year earlier.

Excluding a credit facility refinancing charge, earnings of 69 cents per share beat Wall Street estimates of 63 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 24 percent to $1.66 billion, led by a $288.4 million increase in Australian revenue, Peabody said. Analysts were expecting $1.68 billion.

Second-quarter coal sales volumes of 59.7 million tons were slightly ahead of year-earlier levels and included a 28 percent increase in Australia shipments, the company said.

Higher average realized prices in the U.S. Midwest and lower costs in the West drove a 24 percent margin per-ton expansion. In Australia, there was a nearly 50 percent increase in realized prices, and Australian margins grew 42 percent, Peabody said.

Realized steel-making metallurgical coal prices increased 22 percent, and realized prices for thermal coal used in power generation rose 28 percent.

Peabody raised the low end of its 2010 target for earnings before interest, taxes, depreciation and amortization to $1.7 billion from $1.6 billion while keeping the high end at $1.9 billion.

Similarly, the company raised the low end of its 2010 earnings-per-share outlook, excluding currency effects, to $2.60 from $2.45, with the high end remaining at $3.15. Analysts are expecting $3.10.

Peabody expects third-quarter EBITDA of $475 million to $550 million, with adjusted earnings per share of 75 cents to $1.00. Analysts currently expect 96 cents per share.

The company expects 2010 sales of 240 to 260 million tons, including U.S. production of 185 to 195 million tons and Australia production of 27 to 29 million tons.

In morning trading on the New York Stock Exchange, Peabody stock rose 0.5 percent to $42.54. (Reporting by Steve James; Editing by Derek Caney, Robert MacMillan and Lisa Von Ahn)

© Thomson Reuters 2010 All rights reserved

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