Global demand for coal spurred a 61 percent jump in Peabody Energy Corp.’s second-quarter earnings, reported Thursday. But shares in the world’s largest coal company sank 9.5 percent on what one analyst called concerns about potential softening in coal industry prices.
The St. Louis-based company earned $153.4 million, or 57 cents a share, for the period ending June 30, up from $95.3 million, or 36 cents a share, last year. Revenue surged 18.7 percent to $1.32 billion from $1.11 billion in the prior-year period, as the company increased coal sales by 3.1 million tons.
Analysts polled by Thomson Financial expected profit of 56 cents a share on revenue of $1.4 billion.
Despite the strong showing, shares of Peabody fell $5.07, or 9.5 percent, to $48.28 in afternoon trading on the New York Stock Exchange, where they have traded in a 52-week range of $29.475 to $76.29.
Mark Reichman, an analyst with A.G. Edwards & Sons Inc. in St. Louis, said the decline in the stock price reflected concern about the coal industry, which has generally been strong in recent years.
“We’re a little concerned about what we perceive as a deterioration in the near term in coal industry fundamentals,” Reichman said. “The supply-demand imbalance that drove coal prices higher over the last three years seems to have narrowed.
“If you have economic growth slowing, we think near-term coal prices could soften further, and I think the market has become increasingly concerned about this.”
Peabody President and Chief Executive Officer Gregory H. Boyce said the company strengthened its operating base through major equipment installations and the startup of two new mines during the quarter. It also purchased Excel Coal, a $1.34 billion deal expected to close in the fourth quarter.
And on Tuesday, Peabody announced a partnership with Rentech Inc. of Denver to consider building two U.S. plants that could transform coal into liquid fuels.
The company saw a per ton price increase of more than 6 percent at U.S. operations and 31 percent in Australia. Sales volume rose 5 percent to 60.8 million tons.
“Coal demand continues to set records in the United States and globally, and the long-term coal outlook continues to strengthen,” Boyce said.
Additional coal-based power plants worldwide now under construction represent an additional 175 million tons of use annually.
For the first six months of 2006, Peabody’s earnings per share rose 91 percent to $1.05 on net income of $284 million.
Still, the company said it expects to earn 35 cents to 55 cents per share in the third quarter, short of analyst predictions of 63 cents per share.
For the full year, Peabody predicted a profit of $2 to $2.43, up from its prior outlook of $1.87 to $2.43 per share. Wall Street projects earnings of $2.37 per share for the year.
Peabody operates more than 30 mines and processing facilities in the U.S. and Australia. It produces about 240 million tons of coal a year and maintains nearly 10 billion tons in reserve.
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