Peabody Loss Widens Y/Y, Misses Estimates - Analyst Blog

Coal producer Peabody Energy Corporation BTU reported a loss per share of 19 cents in the first quarter 2014, lagging the break-even Zacks Consensus Estimate by a wide margin. The reported loss was much wider than the year-ago loss of 5 cents per share.

In fact, the reported loss was wider than the company's guidance issued during the fourth quarter 2013 earnings release. The company had projected a loss per share of 10 cents to earnings of 14 cents for the first quarter.

Revenue

Peabody's quarterly revenue of $1.62 billion declined 6.9% year over year and missed the Zacks Consensus Estimate of $1.69 billion by 4.1%.

Despite higher sales volumes in the reported quarter, the top line disappointed Street estimates primarily due to lower realized prices.

Operational Update

Peabody's total sales volume in the quarter was 61.3 million tons, up 7.2% from the prior-year level. The larger output was primarily due to higher sales volume from Western U.S. Mining Operations and Trading and Brokerage Operations.
    
Operating costs and expenses incurred in the reported quarter increased 0.4% year over year.

Revenue per ton, in the U.S., decreased 6.7% year over year to $20.65, while revenue per ton in Australia decreased 16.6% to $74.48.

Financial Update

As of Mar 31, 2014, Peabody had $508.1 million in cash and $549.4 million in inventories versus $444.0 million in cash and $506.7 million in inventories as of Dec 31, 2013.

Long-term debt as of Mar 31, 2013, was $5.98 billion versus $5.97 billion as of Dec 31, 2013.

Guidance

Peabody expects second-quarter 2014 adjusted EBITDA in the range of $140 million to $200 million and the bottom line in the range of a loss per share of 14 cents to 39 cents.

The company reaffirmed its full-year 2014 total sales target of 245–265 million tons, including 185–195 million tons from the U.S., 35–37 million tons from Australia and the remainder from Trading and Brokerage activities.

The company lowered the full-year capital spending projection to $250–$295 million from $275–$325 million due to lower capital spending in the first quarter.

Upcoming Releases

Alliance Resource Partners LP ARLP is slated to release its first-quarter 2014 earnings on Apr 28. The Zacks Consensus Estimate is $1.74.

Rhino Resource Partners LP RNO is slated to release its first-quarter 2014 earnings on May 1. The Zacks Consensus Estimate is 3 cents.

Oxford Resource Partners, LP OXF is slated to release its first-quarter 2014 results on May 21. The Zacks Consensus Estimate is pegged at a loss of 29 cents.

Our View

The World Steel Association forecasts a 3.1% increase in global steel use in 2014. Peabody projects metallurgical coal demand to increase by 10% to 15% in the 2013 to 2016 time frame, led by continuous urbanization and industrialization in China and India.

Peabody projects that nearly 250 gigawatts of new coal-fueled generation will be built over the next three years on a global scale.

However, the supply glut in the global market is putting downward pressure on coal prices, despite an increase in coal demand globally. Peabody felt the brunt of lower prices in the reported quarter.

Peabody Energy Corp. currently holds a Zacks Rank #3 (Hold).