Peabody Energy Corp. said Tuesday its first-quarter profit rose due to increased demand in the U.S. and higher coal prices in Australia, where recent flooding crimped exports.
But the St. Louis-based company _ the world's biggest private-sector coal producer _ offered a full-year earnings outlook sharply below Wall Street's expectations. Peabody's stock fell 2.5 percent to $62.28 in midday trading.
Peabody said its net income attributable to common shareholders was $176.5 million, or 65 cents per share, in the January-March period. That's up from $133.7 million, or 50 cents, a year earlier.
Revenue rose 15 percent to $1.74 billion from $1.51 billion the previous year.
On average, analysts polled by FactSet expected Peabody to earn 61 cents per share on revenue of $1.75 billion.
Peabody said revenue from each ton of coal produced in Australia had risen 43 percent in the quarter. In January, Peabody had warned that flooding in Australia could slow the production and transportation of coal and hurt the company's results.
The Australian operation, which produces much of the coal sent to customers in the Asia-Pacific region, has been a key revenue driver for the company.
Peabody remains bullish about the coal sector, saying global demand is surging as supply remains constrained, helping to boost prices. Gregory H. Boyce, Peabody's chief executive, said coal is experiencing a "global supercycle." Coal-fueled power generation in key markets including China and India rose by double-digits in the first quarter while global steel production increased an estimated 10 percent.
Meanwhile, oil is becoming increasingly scarce and expensive, and alternatives energies can't effectively compete with coal, Peabody said.
"The longer-term landscape is equally bright as we move through the early stages of a long-term supercycle, coal is expected to fuel more incremental generation over the next decade than gas, oil, nuclear, hydro, geothermal and solar combined," Boyce told analysts during a conference call.
Noting that coal plants with more than 700 gigawatts of capacity are planned or under construction, representing nearly 2.5 billion tons of coal use, Boyce said "most of this growth is in Asia, and Peabody has a unique access to this region from Australia, Asia itself and the U.S."
Peabody expects second-quarter earnings to benefit from increasing volumes and prices in Australia, offset somewhat by lingering effects of devastating rains and flooding there.
Peabody said it also may see lower production during the current quarter at its Twentymile Mine in Colorado. The company said it has encountered tricky geology at the mine and is working with federal mine-safety regulators on a new plan.
Peabody said it expects second-quarter adjusted diluted earnings per share of 85 cents to $1.10 and full-year earnings of $3.50 to $4.50 per share. That 2011 outlook was well below the $5.03 per share that FactSet said analysts expected. Citi Investment Research & Analysis analyst Brian Yu said that "disappointment" could pressure Peabody's stock, at least for the time being.
Peabody left its 2011 production outlook unchanged at 245 million to 265 million tons, including 28 million to 30 million tons from Australia and 195 million to 205 million tons from the U.S.
Calling Peabody's first-quarter showing "solid," Jefferies & Company analyst Michael Dudas wrote in a research note to investors that "we remain positive on long-term coal fundamentals in general with Peabody a prime beneficiary."
About half of all electricity in the U.S. is generated by coal-fired power plants, so Peabody stands to benefit from increased energy use. Peabody fuels roughly one-tenth of all U.S. electricity generation and more than 2 percent worldwide.
Peabody's earnings are closely watched because the company usually is among the first of the sector's big players to report each quarter, giving analysts a snapshot of the industry's health, including its outlook for demand for thermal coal.