Peabody Energy Corp. (BTU), the largest U.S. coal company by sales, jumped the most in six months after reporting a narrower loss than analysts expected by reducing costs in its Australia segment as U.S. demand climbs.
Peabody rose 7.6 percent to $20.46 at the close in New York, the biggest increase since Oct. 22. Arch Coal Inc. (ACI), the second-largest coal producer by shipments, jumped 8.4 percent as investors expected the company to benefit from the same trends that helped Peabody since both mine coal in Wyoming’s Powder River Basin, said Brandon Blossman, an analyst at Tudor Pickering Holt & Co. in Houston.
“Anything that feels good for Peabody and feels OK for the Powder River Basin feels great for Arch,” Blossman said by phone today. “It’s a big basin and very important for thermal coal.”
Peabody reported a first-quarter loss that was narrower than analysts expected as it sees a recovery in U.S. demand for the fuel to make electricity. The loss was $23.4 million, or 9 cents a share, compared with net income of $172.7 million, or 63 cents, a year earlier, the St. Louis-based company said today in a statement. Excluding impairment and closing costs, per-share loss beat the 14-cent average of 24 estimates compiled by Bloomberg. Sales declined 13 percent to $1.75 billion from $2.02 billion a year earlier as the company sold less coal.
Rising prices for natural gas, a competing fuel at power plants, are prompting generators to shift back to using coal. U.S. consumption of coal for electricity generation will increase 7.3 percent to 885.2 million short tons in 2013, according to an April 9 report from the Energy Department. Coal companies cut output by 6.9 percent last year, shutting mines and firing workers, in the face of lower demand.
“U.S. coal fundamentals have improved from a year ago as colder temperatures and rising natural gas prices result in utilities increasingly returning to coal,” Chairman and Chief Executive Officer Gregory H. Boyce said in a conference call to discuss results with analysts.
The company forecast its coal sales will rise to 230 to 250 million tons in 2013, from 225.7 million last year. Peabody expects second-quarter per-share adjusted results to range from a 25-cent loss to a 1-cent profit. That lags the average estimate of a 4-cent profit from 24 analysts.
Costs in the company’s Australian segment, which accounted for 43 percent of the company’s revenue in 2012, fell 9.5 percent to $77.15 a ton. U.S. costs rose 1 percent to $15.96 a ton.
“There was a big surprise on Australia costs versus what they were talking about in the fourth quarter,” Blossman said. In January, Peabody said it expects costs “in the low $80 per ton range,” in 2013, a forecast it reiterated today.
The company said its cost to produce U.S. coal is expected to fall as much as 3 percent in 2013.
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