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Last Update: 22-Oct-12 09:13 ET
Peabody Energy shares soar 6% as earnings easily top expectations
Peabody Energy (BTU $27.48 +1.59) reported third quarter earnings of $0.51 per share, excluding non-recurring items, $0.17 better than the Capital IQ consensus Estimate of $0.34, while revenues rose 3.9% year/year to $2.06 billion versus the $1.97 bln consensus. The company issued in-line guidance for fiscal year 2012 with EPS of $1.88-2.08, ex benefit, versus the $1.88 consensus. Peabody is targeting 2012 Adjusted EBITDA of $1.75-1.85 bln. Total sales for 2012 are targeted at 240-250 million tons, including Australian sales of 31-33 mln tons, 188-192 mln tons from the United States and the remainder from Trading and Brokerage activities. "Global macroeconomic conditions continue to be constrained due to the sluggish U.S. economy, European recession and decelerating China growth. At the same time, we are seeing record global coal imports, increasing coal generation, and improving U.S. coal consumption from higher natural gas prices."
Within global coal markets: Metallurgical and thermal coal prices have been impacted by lower than expected global GDP, generation and steel demand, leading to a widespread supply response. In addition to production cutbacks in China, market conditions have driven reductions in the United States, South Africa, Australia and Indonesia. China's coal imports remained strong in Q3 to serve coastal demand, despite softening underlying demand in China. China's net coal imports year to date have risen more than 60 mln tonnes over prior-year levels, and imports from Australia have more than doubled. China's steel production has begun to increase in October. China continues to close small, inefficient thermal and metallurgical coal mines and, in recent months, coal rail deliveries are ~12% below prior-year levels.
Europe has continued to increase coal-fueled generation given high-cost global natural gas and declining nuclear generation. Despite ongoing recession in Europe, year-to-date coal generation has risen 14% over prior-year levels, led by increases in the United Kingdom, Spain, France, Germany and Italy. India thermal coal imports have risen 15% year to date and reached 10 mln tonnes in August, with the country on pace to set a new import record this year. Japan's coal generation is up 26% year to date as high natural gas prices continue to make coal-fueled generation attractive and nuclear utilization continues to remain low. In the U.S.: Peabody projects U.S. coal demand will decline ~120 mln tons in 2012, the vast majority of which has already occurred. Peabody believes that PRB coal is competitive in most plants at natural gas prices of $2.50-2.75 per mmBtu, and Illinois Basin is competitive at $3.25-3.50 per mmBtu.
Within global coal markets: Metallurgical and thermal coal prices have been impacted by lower than expected global GDP, generation and steel demand, leading to a widespread supply response. In addition to production cutbacks in China, market conditions have driven reductions in the United States, South Africa, Australia and Indonesia. China's coal imports remained strong in Q3 to serve coastal demand, despite softening underlying demand in China. China's net coal imports year to date have risen more than 60 mln tonnes over prior-year levels, and imports from Australia have more than doubled. China's steel production has begun to increase in October. China continues to close small, inefficient thermal and metallurgical coal mines and, in recent months, coal rail deliveries are ~12% below prior-year levels.
Europe has continued to increase coal-fueled generation given high-cost global natural gas and declining nuclear generation. Despite ongoing recession in Europe, year-to-date coal generation has risen 14% over prior-year levels, led by increases in the United Kingdom, Spain, France, Germany and Italy. India thermal coal imports have risen 15% year to date and reached 10 mln tonnes in August, with the country on pace to set a new import record this year. Japan's coal generation is up 26% year to date as high natural gas prices continue to make coal-fueled generation attractive and nuclear utilization continues to remain low. In the U.S.: Peabody projects U.S. coal demand will decline ~120 mln tons in 2012, the vast majority of which has already occurred. Peabody believes that PRB coal is competitive in most plants at natural gas prices of $2.50-2.75 per mmBtu, and Illinois Basin is competitive at $3.25-3.50 per mmBtu.
