Coal producer Peabody Energy Corporation BTU reported a loss of 62 cents per share in first-quarter 2015, much wider than the Zacks Consensus Estimate of a loss of 33 cents, resulting in a negative surprise of 87.9%. Peabody had posted a loss of 19 cents in first-quarter 2014.
The loss per share figure in the reported quarter was much wider than the company’s guidance of a loss of 39 cents to 32 cents. The deeper loss was due to refinancing expenses of 2016 Senior Notes.
Revenue
Peabody’s quarterly revenues of $1.54 billion decreased 5.5% year over year and also missed the Zacks Consensus Estimate of $1.61 billion by 4.5%.
Operational Update
Peabody’s total sales volume in the quarter was 60.6 million tons, down 1.1% from the prior-year level.
Operating costs and expenses incurred in the reported quarter declined 5.2% year over year to $1.32 billion, an outcome of the cost-saving measures taken by the company.
Revenues per ton, in the U.S., decreased 2.3% year over year to $20.19, while revenues per ton in Australia plunged 15.9% to $62.65.
Peabody’s first-quarter 2015 adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) were $166 million, on the lower end of Peabody’s guidance range of $160 million to $200 million.
Operating profit in first quarter 2015 was $2.2 million compared with a profit of $2.9 million a year ago.
Financial Update
As of Mar 31, 2015, Peabody had $637.1 million in cash and $369.5 million in inventories compared with $298.0 million in cash and $406.5 million in inventories as of Dec 31, 2014.
Long-term debt as of Mar 31, 2015, was $6.29 billion, up from $5.96 billion as of Dec 31, 2014.
Guidance
Peabody expects second-quarter 2015 adjusted EBITDA in the range of $135 million to $175 million and a loss per share of 59 cents to 49 cents.
The guidance takes into consideration lower seaborne thermal coal pricing and 3 cents per share of debt extinguishment charges related to the remaining outstanding 2016 Senior Notes redeemed on Apr 15, 2015.
For 2015, the company is now targeting total sales of 235–255 million tons (earlier 245–265 million) including 180–190 million tons (earlier 190–200 million tons) from the U.S., 35–37 million tons from Australia and the remainder from Trading and Brokerage activities.
The company projects 2015 capital spending of $170–$190 million, down from its earlier projection of $180–$200 million.
Upcoming Releases
Rhino Resource Partners LP RNO is slated to release its first-quarter 2015 results on Apr 30. The Zacks Consensus Estimate is pegged at a loss of 23 cents.
Westmoreland Coal Co. WLB is slated to release its first-quarter 2015 earnings on Apr 24. The Zacks Consensus Estimate is pegged at a loss of 37 cents.
CONSOL Energy Inc. CNX is slated to release its first-quarter 2015 earnings on Apr 28. The Zacks Consensus Estimate is 11 cents.
Our View
Peabody’s lower-than-expected performance was due to weak sales volume and a decline in the realized price per ton of coal compared with the year-ago period. The softness in coal demand in the U.S. is expected to continue due to lower natural gas prices.
Peabody now projects 2015 U.S. coal demand to decline by 80 to 100 million tons due to the ongoing weakness in natural gas prices.
To cope with the soft coal markets, the company is aggressively implementing cost-saving initiatives. Its exposure to both thermal and metallurgical (met) coal is an added advantage.
Given the fact that U.S. regulations are tightening the noose on coal-fired generation, the company’s initiatives to expand in the power hungry Asia-Pacific region are encouraging.
Peabody Energy Corp. currently holds a Zacks Rank #3 (Hold).
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