Coal producer Peabody Energy Corporation (BTU) reported a loss per share of 59 cents in the third quarter of 2014, narrower than the Zacks Consensus Estimate of a loss of 66 cents. The company reported earnings of 5 cents per share in the year-ago quarter.
GAAP loss in the reported quarter was 58 cents compared to earnings of 6 cents per share in the year-ago quarter. The difference between GAAP and operating earnings in the reported quarter was due to remeasurement benefit related to foreign income tax accounts of a penny.
Revenue
Peabody’s quarterly revenues of $1.72 billion declined 4.1% year over year but surpassed the Zacks Consensus Estimate of $1.64 billion by 4.9%.
The year-over-year decline in sales volumes in the reported quarter and lower realized prices of Australian tons sold led to the year-over-year shortfall.
Operational Update
Total sales volume in the quarter was 62.5 million tons, down 9.6% from the prior-year level. This was primarily due to lower sales volume from U.S. Mining Operations and Trading and Brokerage Operations.
Operating costs and expenses incurred in the reported quarter increased 1.5% year over year to $1.45 billion.
Revenues per ton, in the U.S., edged up 0.2% year over year to $21.24, while revenues per ton in Australia decreased 5.6% to $65.70.
Financial Update
As of Sep 30, 2014, Peabody had $466.5 million in cash and $490.9 million in inventories as compared to $444.0 million in cash and $506.7 million in inventories as of Dec 31, 2013.
Long-term debt as of Sep 30, 2014, was $5.97 billion, in line with 2013 end levels.
Guidance
Peabody expects 2014 adjusted EBITDA in the range of $765 million to $815 million and the bottom line in the range of a loss per share of $1.48 to $1.38.
The company’s 2014 total sales target is 245–255 million tons, which includes U.S. sales of 185–190 million tons and Australian sales of 36–38 million tons.
The company lowered the full-year capital spending projection to $200–$220 million from $210–$250 million.
Upcoming Releases
Natural Resource Partners LP (NRP) is slated to release its third-quarter 2014 earnings on Nov 28. The Zacks Consensus Estimate is 32 cents.
SunCoke Energy Partners, L.P. (SXCP) is slated to release its third-quarter 2014 earnings on Oct 24. The Zacks Consensus Estimate is 56 cents.
Arch Coal Inc. (ACI) is slated to release its third-quarter 2014 results on Oct 28. The Zacks Consensus Estimate is pegged at a loss of 41 cents.
Our View
Peabody projects that nearly 250 gigawatts of new coal-fueled generation will be built over the next three years on a global scale. Demand for thermal coal is expected to increase by 550 million tonnes during the aforesaid period.
However, the supply glut in the global market and concerns over Chinese coal imports could impact the future prospects of the company. Going forward, the reintroduction of coal import tariff by China might impact the export opportunities of Peabody’s Australian platform. The Chinese government has decided to levy tariffs on coal imports to safeguard the interest of domestic coal producers. China imposed a 6% tariff on thermal coal imports and a 3 % tariff on coking coal.
Poor quality of coal and lower production had led to higher volumes of coal imports from India. Since the majority of India’s power plants are coal based, it might open up a new export window for Peabody’s thermal coal.
Peabody Energy Corp. currently holds a Zacks Rank #3 (Hold).
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