High Coal Prices Spur Peabody Profits

By CHRISTOPHER LEONARD

ST. LOUIS – High coal prices delivered stronger profits for Peabody Energy Corp. during the third quarter, with net income more than doubling compared to the same period last year, the nation’s largest coal company said Tuesday. Despite the rise, earnings fell short of Wall Street expectations.

For the quarter ended Sept. 30, St. Louis-based Peabody reported net income of $113.3 million, up from $43.4 million during the same quarter last year. Earnings per share for the quarter were 84 cents, versus 33 cents in the same quarter last year.

Earnings came in slightly below Wall Street’s expectations, however. Analysts were predicting income of 85 cents per share for the third quarter, according to Thompson Financial.

Peabody said Tuesday it expects to earn between $2.75 and 3.20 per share for the year. Analysts expect Peabody to earn $2.98 per share for the year, according to Thompson.

The company’s stock price fell $3.59, or 4.3 percent, to $80.30 per share in afternoon trading on the New York Stock Exchange. The stock has traded between $30.05 and $86.90 over the last year.

Revenue for the quarter was $1.2 billion, up 33 percent from last year when revenue was $919 million. The company sold 61.6 million tons of coal during the quarter, up 5 percent from last year when it sold 58.7 million tons.

“Peabody’s 2005 performance continues on its record pace,” said Peabody President and Chief Executive Officer-Elect Gregory H. Boyce. “Coal fundamentals are excellent, and coal is fueling the world’s largest and fastest growing economies.”

Coal prices continue to climb as demand remains steady while supplies tighten, said Mark Reichman, an analyst with A.G. Edwards & Sons in St. Louis. Utility companies have lower than usual coal reserves and are pushing the price higher as they try to boost inventories, he said.

Reichman said Peabody is in line to boost earnings over the next year, but profits might not always jump as quickly as during the third quarter. Supplies of coal will likely remain tight because it takes so long for companies to open new production facilities, he said.

U.S. utility companies have roughly 100 million tons stockpiled to meet demand in coming months, Reichman said. That’s lower than the average 123 million tons that companies have had over the last five years, he said.

Peabody is also expanding overseas operations to reap the benefits of increasing demand in India and China, Reichman said.