ST. LOUIS (AP) — Peabody Energy Corp., the world's biggest private-sector coal company, reports second-quarter results before the stock market opens Tuesday, hoping to impress Wall Street with its recent spate of moves meant to cash in on red-hot demand for coal in Asia.
WHAT TO WATCH FOR: Analysts may be eager to quiz Peabody or weigh in about the St. Louis-based company's willingness to open its checkbook. This month Peabody announced its latest push to buy Macarthur Coal Ltd., based in Australia, this time teaming with steelmaker ArcelorMittal in a $5 billion bid.
Adding Macarthur — a major producer of pulverized coal used by steel producers — would bolster Peabody's growing footprint in Australia. Its operations there produce much of the coal sent to customers in the Asia-Pacific region — notably China and India — and have been a key revenue driver for Peabody.
Peabody's latest pursuit of Macarthur comes at a curious time, given the government's proposal for a new tax on the country's worst polluters that some fear could cause the collapse of the country's lucrative coal industry. The tax is expected to take effect a year from now.
Peabody also has signed an agreement to develop a huge Chinese surface mine expected to produce 50 million tons of coal a year for decades.
In the U.S., Peabody subsidiary BTU Western Resources Inc. submitted a winning bid of $211 million for more than 221 million tons of federal coal in Wyoming's Powder River Basin.
Peabody said in April it remained bullish about 2011, convinced that global coal demand is in the infancy of a "long-term supercycle," as China, India and other emerging nations dramatically boost energy use, steel consumption grows, oil becomes increasingly scarce and alternatives lack the cost and scale to effectively compete.
About half of all electricity in the U.S. is generated by coal-fired power plants, so Peabody stands to benefit from increased energy use. Peabody fuels roughly one-tenth of all U.S. electricity generation and more than 2 percent worldwide.
WHY IT MATTERS: Peabody's earnings are closely watched because the company usually is among the first of the sector's big players to report each quarter, giving analysts a snapshot of the industry's health, including an outlook for thermal coal demand used to produce electricity.
WHAT'S EXPECTED: On average, analysts polled by FactSet expect Peabody to earn $1.04 per share on revenue of $2.02 billion. Peabody has said it expects adjusted diluted earnings per share of 85 cents to $1.10 per share.
Peabody said in April that it expected second-quarter earnings to benefit from increasing volumes and prices in Australia, offset somewhat by lingering effects of devastating rains and flooding there.
EARLIER SHOWING: Peabody reported that its profits for the first three months of the year rose to $176.5 million, or 65 cents per share, due to increased demand in the U.S. and higher coal prices in Australia. That's up from $133.7 million, or 50 cents, a year earlier.
LAST YEAR'S QUARTER: Peabody reported earnings of 69 cents per share on revenue of $1.66 billion in the January-March period of 2010.
STOCK PERFORMANCE: Peabody shares dropped 19 percent during the quarter.
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