Shares of Peabody Energy Corp. jumped 9 percent Monday after the nation's largest coal miner reported earnings that trumped Wall Street estimates and executives signaled that coal markets may be bottoming out.
"While the global coal environment remains challenged there are indications that markets are stabilizing," Gregory H. Boyce, Peabody's chief executive, said in a statement.
St. Louis-based Peabody and other coal producers have idled mines and slashed output this year amid weak as relatively inexpensive natural gas prices eroded demand at power plants. A slowdown in economies overseas have also weakened prices for so-called metallurgical coal used for making steel.
Peabody's third-quarter net income dropped 84 percent to $42.1 million, or 16 cents a share, largely on a decline in Australian coal prices and charges related to the closure of an Indiana mine announced last month.
While the company has trimmed production at some less profitable mines in response to the industry slump, revenue increased 3.9 percent to $2.06 billion. Sales volumes also rose, reflecting last year's $5 billion purchase of Australia-based Macarthur Coal Ltd.
In fact, excluding non-recurring costs, Peabody's earnings of 51 cents a share easily topped the 34-cent estimate of analysts surveyed by Bloomberg.
On a conference call with analysts and investors, company officials maintained a cautious tone. They outlined plans to cut another $100 million of annual overhead costs by eliminating jobs and other spending reductions. Peabody is also deferring new capital projects.
The reductions are necessary, they said, in the face of continued sluggishness in the U.S. and European coal markets and a slowdown in growth in developing Asia.
But, Boyce noted, "We see several bright spots despite these headwinds."
In particular, he said natural gas prices continue to tick higher, making coal more competitive for power generation. And China and India continue to import more coal to fuel their economies.
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