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Peabody Posts Wider-than-Expected Q4 Loss, Gives Guidance

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Coal producer Peabody Energy CorporationBTU reported a loss of $9.27 per share in the fourth-quarter 2015, wider than the Zacks Consensus Estimate of a loss of $8.89, resulting in a negative surprise of 4.3%. However, Peabody was able to pare its loss to a large extent from a loss of $18.18 per share a year ago.

Peabody Energy Corporation (BTU) Street EPS & Surprise Percent - Last 5 Quarters | FindTheCompany

Peabody incurred a loss of $36.39 per share in 2015, wider than the Zacks Consensus Estimate of a loss of $33.03 per share.

Revenues

Peabody's quarterly revenues of $1.31 billion decreased 22.1% year over year but surpassed the Zacks Consensus Estimate by a meager 0.2%.

In 2015, Peabody recorded revenues of $6.79 billion, down 17.4% year over year. The top line was only 0.2% short of the Zacks Consensus Estimate.

The decline in total revenues in 2015 was due to a drop in sales volume as well as a decline in the sales price per ton of coal.

Highlights of the Release

Peabody's total sales volume in the quarter was 57.9 million tons, down 9.9% from the prior-year level. Sales volume in 2015 was 228.8 million tons, lagging last year's sales of 249.8 million tons by 8.4%.

Operating costs and expenses incurred in the reported quarter declined nearly 12% year over year to $1.23 billion.

Revenue per ton, in the U.S., in 2015 decreased 5.7% year over year to $19.84, while revenue per ton in Australia plunged 20.1% to $55.96.

Peabody's 2015 earnings before interest, tax, depreciation and amortization ("EBITDA") were $434.6 million, down 46.6% from $814 million in 2014.

Financial Update

As of Dec 31, 2015, Peabody had $261.3 million in cash and $221.3 million in inventories compared with $298.0 million in cash and $563.1 million in inventories as of Dec 31, 2014.

Long-term debt as of Dec 31, 2014, was $6.29 billion compared with $5.96 billion as of Dec 31, 2014.

Guidance

For 2016, the company is targeting total sales of 195-210 million tons, including 150-160 million tons from the U.S., 34-36 million tons from Australia and the remainder from Trading and Brokerage activities.

The company projects 2016 capital spending of $120-$140 million.

Other Company Releases

Foresight Energy FELP is slated to release fourth-quarter 2015 earnings on Feb 12. The Zacks Consensus Estimate is 6 cents.

Cloud Peak Energy Inc. CLD is slated to release fourth-quarter 2015 results on Feb 17. The Zacks Consensus Estimate is a loss of 19 cents.

Westmoreland Coal Co. WLB is slated to release fourth-quarter 2015 results on Feb 26. The Zacks Consensus Estimate is a loss of 90 cents.

Our View

Peabody expects difficult times ahead and as a result has lowered its 2016 sales volume guidance. The company expects U.S. utility coal demand to decline in the range of 40-60 million tons primarily due to lower natural gas prices and coal plant retirements. We believe the new Climate Action Plan also had a role to play here, with more utility operators preferring clean sources to produce electricity to meet the target laid down by the plan.

The export market is also not looking promising and the total coal export from the U.S. is expected to be 150-170 million tons lower than 2015 levels. Rising competition from international players and slower-than-expected demand growth are the primary reasons for the expected shortfall.

Given the headwinds, Peabody continues to lower operating costs and reshape its existing portfolio so as to unlock the value of its assets. Management has decided to sell some of its coal assets and concentrate on areas in the U.S. and Australia, which will provide the best returns in this difficult time.

The road ahead for coal stocks is undoubtedly difficult. Let's hope that the initiatives undertaken by the company will help it to survive the challenges, which few of its peers have been able to do in recent times.

Peabody Energy Corp. currently holds a Zacks Rank #4 (Sell).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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