(Corrects time of conference call in text below story.)
Peabody Energy Corp. (BTU:US), the largest U.S. coal producer, posted a surprise third-quarter profit as domestic prices for coal used to generate electricity recovered.
Excluding one-time items, earnings were 5 cents a share, the St. Louis-based company said in a statement today, beating the 4-cent loss that was the average of 24 analysts’ estimates compiled by Bloomberg. Peabody had a third-quarter net loss of 10 cents a share, compared with net income of 16 cents a year earlier. Sales dropped to $1.8 billion from $2.06 billion, exceeding the $1.78 billion average estimate.
Prices for thermal coal produced in the Powder River Basin coal-mining region in Wyoming and Montana -- where Peabody operates the North Antelope Rochelle and Caballo mines -- averaged $10.29 a metric ton in ICE Futures trading in the quarter, up 23 percent from a year earlier. Peabody produces more than 140 million tons of coal a year from the Powder River Basin, according to its website.
“Exceptionally strong” growth in Powder River Basin output will help earnings to surpass analysts’ estimates, Jeremy Sussman, a New York-based analyst at Clarkson Capital Markets who has a hold recommendation on the shares, said in a note before the results were announced.
Peabody, the first major U.S. coal producer (BTU:US) to report quarterly earnings, rose 1.1 percent to $17.89 in New York yesterday. The shares have declined 31 percent in the past year.
While Powder River Basin prices have recovered in 2013, U.S. thermal coal is still cheaper than it was two years ago. The boom in natural gas output from shale rock has prompted some domestic power utilities to switch generation to gas from coal.
Prices for metallurgical coal, which Peabody also produces, are down year on year amid a supply glut. The global benchmark contract price for seaborne exports on the raw material was set at $145 a ton for the third quarter, down 36 percent from a year earlier, according to data compiled by Bloomberg.
Coal-fired electricity capacity in the U.S. is also facing more regulation. In September, the U.S. Environmental Protection Agency unveiled new rules that require coal plants to capture and store some of the carbon dioxide they emit. The move will push up power prices because the required capture technology isn’t commercially feasible, Peabody said in a Sept. 20 statement.
(Peabody will hold an earnings conference call at 11 a.m. New York time, accessible at http://www.peabodyenergy.com.)
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