UPDATE 2-Peabody results top estimates; shares rally
* Adjusted profit 5 cents/share vs Street view loss 4 cents
* Revenue down 13 percent at $1.80 billion (Recasts first paragraph, updates share activity, adds outlook, background)
Oct 17 (Reuters) - Coal miner Peabody Energy Corp reported better than expected quarterly results as higher natural gas prices strengthened U.S. utilities' demand for coal and the company reined in costs in Australia and the United States.
Peabody shares were up 5 percent following the announcement, which also lifted shares of other U.S. coal miners. The Dow Jones U.S. Coal index was up 1.78 percent.
Peabody, the world's largest private-sector coal miner, sells both higher-margin metallurgical coal, used to make steel, and thermal coal used to generate electricity.
Both markets have been under pressure, with a drop in steel demand hammering prices for metallurgical coal. Miners have cut production of steel-making coal to underpin prices, but the global market is still oversupplied. Even so, a key metallurgical coal price benchmark improved to $152 per tonne from $145 per tonne last quarter, Peabody said.
U.S. utilities have been burning less thermal coal in recent years as the boom in hydraulic fracturing extraction techniques has driven down prices for natural gas. Higher natural gas prices this year, however, have prompted a switch back to cheaper coal. Natural gas-fired electricity generation has declined 14 percent this year, Peabody said.
Shipments from the company's Australian mines rose 6 percent to 9 million tons, while costs per ton fell 8 percent.
Average unit costs fell 3 percent at Peabody's U.S. mines.
The company's adjusted profit was 5 cents per share. On that basis, analysts on average had expected a loss of 4 cents per share, according to Thomson Reuters I/B/E/S.
Peabody posted a net loss for the quarter of $26.1 million, or 10 cents per share. A year ago, it had a net profit of $42.9 million, or 16 cents per share.
Revenue fell nearly 13 percent to $1.80 billion, in line with analysts' estimates.
For the full year, Peabody expects adjusted earnings before interest, taxes depreciation and amortization of $1.07 billion to $1.15 billion and earnings per share of 27 cents to 45 cents. Analysts extrapolated that the company's fourth-quarter EBITDA outlook was slightly below the average Wall Street estimate. Morgan Stanley's Evan Kurtz said the company was likely being conservative.
Peabody cut the top end of its full-year capital spending target to $400 million from $450 million as coal prices remain weak.
Peabody shares were up 4 percent to $18.61 in early afternoon trade on the New York Stock Exchange. The stock earlier rose as high as $19.57, its highest level since early June. (Reporting by Nichola Groom in Los Angeles and Swetha Gopinath in Bangalore; Editing by Maju Samuel and Leslie Adler)
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