April 22 (Bloomberg) -- Peabody Energy Corp., the largest U.S. coal producer, beat analyst expectations for first-quarter profit and raised its guidance for the year on surging demand and prices.

Net income fell 35 percent to $57.2 million, or 21 cents a share, from $88.5 million, or 33 cents, a year earlier, the St. Louis-based company said today in a statement. Peabody was expected to earn 16 cents, the average of six analyst estimates compiled by Bloomberg. Sales rose 15 percent to $1.28 billion.

Chief Executive Officer Gregory Boyce, 53, has expanded output in the U.S. West and Australia to profit from increasing demand in Asia, and all-time high prices for power power-plant and steelmaking coals globally.

``They're getting phenomenal pricing going forward and beat the street for the quarter,'' said Ann Kohler, an analyst at Caris & Co. in New York who has a ``buy'' rating on Peabody and owns none.

Peabody forecast 2008 profit of $2.20 to $3 a share, up from January guidance of $1 to $1.85 a share. That's higher than the $1.92 analysts expected. Production estimates were unchanged at 220 million to 240 million tons. The company earned $1.56 in 2007.

In Australia, prices for coking coal used in steelmaking tripled to $300 per metric ton, and for steam coal used by power plants rose 130 percent to $125 per metric ton, Peabody said.

Peabody was little changed, slipping 27 cents to $68.56 in New York Stock Exchange composite trading. The stock has gained 11 percent this year.

Rising Prices

In U.S. spot markets, coal from Wyoming's Powder River Basin, where Peabody holds the largest reserves, rose 67 percent in the past year to $15 a ton, according to data compiled by Bloomberg.

Pricing in recent contract negotiations has jumped to as much as $25 a ton, Chief Financial Officer Richard Navarre said on a conference call with analysts. Exports from the U.S. have tripled since 2006 as global stockpiles fall short by 100 million tons, he said.

During the first quarter, Peabody's Australian mines were hit by heavy rains and flooding that crimped production and deliveries, costing Peabody $60 million.

``They had a tough quarter in Australia with all the flooding,'' said Gordon Howald, an analyst at Calyon Securities in New York who has a ``buy'' rating on the shares and owns none.

Australian Mines

With those operations returning to normal, Peabody expects to capture higher prices from its Australian mines. That will boost second-quarter earnings to between 35 cents and 60 cents a share. Analysts had expected profit of 44 cents.

Peabody sold 61.2 million tons of coal in the first quarter, up from 55.2 million tons a year earlier. Prices for its U.S. coal under long-term contracts rose 6 percent to an average of $17.23 a ton, while in Australia the average price slipped 5.8 percent to $54.24 a ton.

Peabody yesterday expanded its ability to export coal from the U.S. East Coast with an increased stake in a facility in Virginia that can handle up to 20 million tons of coal a year. Peabody, with a 37.5 percent stake, will get about 7 million tons of that capacity.

Arch Coal Inc., the second-biggest coal producer, yesterday said first-quarter profit more than doubled to $81.1 million as it sold more coal at higher prices.

To contact the reporter on this story: Christopher Martin in New York at cmartin11@bloomberg.net.

Last Updated: April 22, 2008 16:41 EDT