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updated: 7/23/2013 11:57 AM

Coal miner Peabody reports lower 2Q earnings

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Associated Press

ST. LOUIS -- Coal miner Peabody Energy Corp. said Tuesday its second-quarter earnings slid 56 percent because of lower pricing, but the results still handily beat Wall Street's expectations partly because of the company's continued belt-tightening.

St. Louis-based Peabody, the world's biggest private-sector coal producer, said its net income attributable to common shareholders fell to $90.3 million, or 33 cents per share, for the April-June period. That's down from $204.7 million, or 75 cents per share, a year earlier.

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Revenue fell 13 percent to $1.73 billion from $1.98 billion a year ago.

Analysts polled by FactSet on average expected an adjusted loss of 5 cents per share on higher revenue of $1.82 billion.

Peabody says it expects adjusted diluted earnings per share of between a loss of 16 cents to a profit of 9 cents for the third quarter, during which time analysts expect a loss of 13 cents per share. The company did not offer guidance for the full year.

Peabody, which expects this year's per-ton U.S. revenues to be 5 to 10 percent lower than last year, left its full-year sales forecast unchanged at 230 million to 250 million tons, including 180 million to 190 million in the U.S. and 33 million to 36 million tons in Australia.

Its shares rose $1.18, or 7.2 percent, to $17.50 in midday trading.

"The strength of Peabody's global platform and the significant progress of our cost containment actions helped us overcome a number of challenges during the quarter," Gregory Boyce, Peabody's chairman and chief executive, said in a statement. "Our progress in reducing capital and moving our operations down the cost curve highlights the actions we are taking to succeed in all market conditions."

Peabody said its second-quarter showing reflected its ongoing "tight capital discipline," including streamlining involving contractors, temporary labor and overtime while working across the supply chain to pare material and supply costs.

Peabody said it would continue reigning in spending and cut its capital targets for 2013 by $100 million, to a range of $350 million to $450 million.

"Overall, we believe investors will react positively to the company's effective cost containment and capital management as (Peabody) improves its financial and operating position in the face of a tepid global pricing environment," Daniel Scott, a Cowen & Co. analyst, said in a research note to clients.

Peabody bullishly said it expects U.S. demand for coal used in electricity production to grow by 50 million to 70 million tons as such thermal coal "has regained significant market share from natural gas," which many utilities had been using over the past year or so instead of coal for fuel as a cheaper alternative.

But Peabody said natural gas prices have been significantly higher than a year ago, leading to a 15 percent drop-off in utility use of natural gas as fuel and an 11 percent rise in coal demand over the first half of this year.

Peabody's earnings are closely watched because the company usually is among the first of the coal sector's big players to report earnings each quarter. It gives analysts and investors a snapshot of the industry's health, including an outlook for thermal coal demand used to produce electricity.

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