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Earnings slide at Peabody Energy


Peabody Energy’s secondquarter earnings tumbled by two-thirds, falling well short of Wall Street expectations, and the coal miner released a full-year outlook that will likely disappoint as well.

The St. Louis-based company, one of the world’s biggest coal producers, reported net income of $79.2 million, or 29 cents per share. That compares with $233.3 million, or 85 cents per share, in the April-through-June period a year ago.

Revenue rose to $1.34 billion from $1.53 billion in last year’s second quarter.

Analysts polled by Thomson Financial expected, on average, earnings per share of 49 cents and revenue of $1.44 billion.

Peabody CEO and Chairman Gregory Boyce said the company will be well positioned for a rebound in the economy.

“Countries and companies with strong balance sheets are using this time to seek out natural resource investment opportunities around the world, and Peabody is very much in this class,” said Boyce. “The strength of our balance sheet, our global platform and low-cost operating base allows us to look past the current storms and invest for significant long-term growth when markets rebound.”

Peabody sold 59.5 million tons of coal during the quarter, compared with 59.6 million tons during the same period last year.

Peabody, which had previously withheld its full-year financial outlook, said Tuesday it now expects earnings this year of $1 to $1.40 per share. Analysts polled by Thomson Financial expected, on average, $2.14 per share.

Company shares fell 2.5 percent, or 88 cents, to $33.95 when the market opened Tuesday.

Peabody Energy Corp., whose coal fuels roughly one-tenth of all U.S. electricity generation and more than 2 percent of worldwide electricity, stood by its previous lowered production expectations of 185 to 190 million tons in the United States and 20 to 23 million tons in Australia, with estimated total sales of 225 to 245 million tons.

The lower-than-expected profits came a day after FBR Capital Markets analyst David Khani recommended that investors buy Peabody shares, citing strong long-term steel and steam demand trends from China and India.

Amid robust real-estate activity, China continues to import hard coking coal to improve steel quality, Khani said, adding that India’s rising demand for both thermal and coking coal “should pull on Peabody’s volumes through 2012.”

Even with a weak domestic market, Khani said the company is positioned to perform well, given its fully contracted position in 2009.

Khani raised his price target for the stock to $44 from $36.

Many analysts expected weaker second-quarter earnings in the sector, especially for miners of coal used to produce electricity. The reasons include soft prices for natural gas — which also fires power plants — and lower electrical demand because of the weak economy and cooler summer weather in many parts of the country.

Over the first half of this year, Peabody earned $249.2 million, or 93 cents per share, on $2.8 billion in revenues. During the same period last year, the miner’s earnings of $290.3 million, or $1.06 per share, came on revenues of $2.79 billion.

Peabody’s 119.1 million tons of coal sold in the first six months of this year compared with 120.5 million tons a year ago.

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