Peabody Energy Corp. said Tuesday its net income more than doubled during the third quarter as the coal miner benefited from strong global demand for coal, particularly from China and India.
The company again lifted the midpoint of its full-year profit outlook on the strong results, as the Asia-driven demand offsets continued lags in the U.S. and Europe. The world's largest private-sector coal producer said demand for coal in the Pacific region is 15 percent higher than it was this time last year. Peabody expects China to import between 135 to 140 million tons for the year, with India importing 100 million tons.
CEO Gregory Boyce said the quarterly results represent just the beginning of a "super cycle" of increasing demand as Asia leads the rest of the world in an economic recovery.
"The demographics and resulting trends are overwhelming," Boyce said during a conference call Tuesday. "Today, 3.6 billion people lack adequate access to electricity and another 2 billion people over the next two decades will need electricity access."
China alone will increase its coal imports by 1 billion tons a year between 2011 and 2015 to generate more electricity, Boyce said.
The St. Louis-based company said its net income rose to $236.3 million, or 83 cents per share, for the quarter ended Sept. 30. That compares with year-ago earnings of $110.8 million, or 40 cents per share. Excluding one-time items, adjusted earnings totaled 99 cents per share, beating Wall Street's expectation of 91 cents.
Revenue climbed 11 percent to $1.86 billion from $1.67 billion during the same quarter last year, also topping analysts' average forecast of $1.85 billion. The company's Australian operations, which produce much of the coal sent to customers in the Asia Pacific region, was a key revenue driver.
China's coal-fueled power generation is up 19 percent and steel production has risen 15 since last year, while its net coal imports through August jumped 60 percent from last year, according to Peabody. India coal imports have increased nearly 30 percent year to date through September.
The economic recovery should boost Peabody's future earnings in part because coal companies have not overproduced during the downturn, Jefferies & Co. Inc. analysts said.
"Industry production discipline and normalized demand should better support U.S. coal fundamentals, in our view," the report said. Still, Boyce remarked that the company expects U.S. GDP and industrial production to remain "muted" in 2011, with the recovery more pronounced in 2012.
Looking ahead, Peabody now sees adjusted earnings per share of $2.95 to $3.15 for the full year. The $3.05 midpoint of the range tops analysts' average forecast of $3.03 per share. The company continues to target 2010 sales of 240 to 260 million tons.
Shares fell $1, or nearly 2 percent, to close at $50.53. Jefferies analyst Michael Dudas said Peabody's stock fell Tuesday because it was caught by broader market declines after China's government announced it will hike interest rates. That stoked speculation that Asian demand for raw materials could slow if the Chinese economy cools.
"When you have commodity prices come down and the energy prices come down, it hurts coal companies," Dudas said.