Peabody Q2 Loss Narrower Than Expected, Trims Guidance
Coal producer Peabody Energy Corporation (BTU - Analyst Report) reported a loss of 58 cents per share in second-quarter 2015, marginally narrower than the Zacks Consensus Estimate of a loss of 59 cents. Peabody had posted a loss of 28 cents in second-quarter 2014.
The loss per share figure in the reported quarter was within the company’s guidance of a loss of 59 cents to 49 cents.
Loss from continuing operations in the reported quarter including 7 cents for restructuring and $3.06 for impairments were $3.71 per share.
Revenue
Peabody’s quarterly revenues of $1.34 billion decreased 23.8% year over year and also missed the Zacks Consensus Estimate of $1.49 billion by 10.1%.
Revenues were adversely impacted by lower sales price per ton and sales volume compared to the prior-year period.
Operational Update
Peabody’s total sales volume in the quarter was 51.9 million tons, down 15.9% year over year.
Operating costs and expenses declined 18.3% year over year to $1.2 billion, an outcome of the cost-saving measures taken by the company.
Revenues per ton, in the U.S., decreased 7.7% year over year to $20.55, while revenues per ton in Australia plunged 19.4% to $58.96.
Peabody’s second-quarter 2015 adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) were $87 million, in line with the revised expectation of the company.
Financial Update
As of Jun 30, 2015, Peabody had $487.1 million in cash and $395.6 million in inventories compared with $298.0 million in cash and $406.5 million in inventories as of Dec 31, 2014.
Long-term debt as of Jun 30, 2015, was $6.29 billion, up from $5.96 billion as of Dec 31, 2014.
Guidance
For 2015, the company is now targeting total sales of 225–245 million tons (earlier 235–255 million) including 180–190 million tons from the U.S., 34–36 million tons (earlier 35–37 million) from Australia and 11–19 million tons (earlier 20–28 million) from Trading and Brokerage activities.
The company projects 2015 capital spending of $160–$170 million, down from its earlier projection of $170–$190 million.
Upcoming Releases
Rhino Resource Partners LP (RNO - Snapshot Report) is slated to release its second-quarter 2015 results on Jul 30. The Zacks Consensus Estimate is pegged at a loss of 20 cents.
Cloud Peak Energy (CLD - Snapshot Report) is slated to release its second-quarter 2015 earnings on Jul 29. The Zacks Consensus Estimate is pegged at a loss of 86 cents.
Arch Coal Inc. (ACI - Analyst Report) is slated to release its second-quarter 2015 results on Jul 30. The Zacks Consensus Estimate is pegged at a loss of 59 cents.
Our View
Peabody continues to expect difficult times ahead and as a result has lowered its 2015 sales volume guidance. The company expects 55 gigawatts of U.S. coal-fueled generation to retire by 2017. Consequently, it believes U.S. utility coal demand will decline by approximately 30 to 50 million tons between 2014 and 2017. This is indeed a dismal picture for the coal industry.
To cope with the soft coal markets, the company is aggressively implementing cost-saving initiatives. During the second quarter, the company decided to curtail production in the North Goonyella Mine in Queensland, Australia. In addition, it reduced nearly 250 corporate and regional positions to create a leaner organization. The job slash is expected to save $40 million to $45 million per year.
Peabody however received the much needed confirmation from Wyoming officials that its mines in the state are still eligible for self-bonding. This affirmation will undoubtedly ease some of the financial stress that was building on this coal company.
Peabody Energy Corp. currently holds a Zacks Rank #4 (Sell).
Disclosure: None.