* Adj Q3 99 cents/share vs Wall St view 91 cents/share
* Sees long-term coal “supercycle”
* Shares drop 2.1 pct on China interest rate rise (Recasts; adds share drop on China rate rise)
By Steve James
NEW YORK, Oct 19 (Reuters) - Peabody Energy Corp (BTU.N) beat Wall Street estimates on Tuesday with third-quarter profit more than doubling, but its stock was hurt along with other coal mining shares by China’s surprise interest rate increase.
The company raised the lower point of its full-year 2010 earnings targets as Chinese and other burgeoning Asian economies drive demand for thermal coal for power generation and metallurgical coal for steel-making.
Despite the results and improved outlook, Peabody’s stock was down 2.1 percent at $50.46 in afternoon trading on the New York Stock Exchange — but less than other coal companies that fell 4 percent or 5 percent.
Analysts said the drop in coal company stocks was likely a result of China raising its lending and deposit rate by 25 basis points for the first time in three years. China is a big importer of coal.
“Peabody believes that the global coal industry is in the early stages of a long-term supercycle, led by China and India,” said Chairman and Chief Executive Officer Gregory Boyce.
But despite the dynamic markets in the Pacific region, he said he did not see the U.S. economy picking up too much in the next year.
“We now expect U.S. GDP and industrial production to remain muted in 2011 and believe the U.S. recovery will be more pronounced in 2012,” Boyce told Wall Street analysts on a conference call.
Yet, he anticipates a stronger performance from Peabody’s U.S. mines in the fourth quarter as Australian production struggles with heavy rainfall in the coal belts of New South Wales and Queensland.
“As you look at the third quarter, there is no question there has been a fair bit of weather-related impacts across the Australian region.
“We probably will see a stronger performance out of the U.S. and a more muted year-end performance out of Australia,” Boyce said.
St Louis-based Peabody said third-quarter income from continuing operations was $237 million, or 83 cents per share, compared with $110.8 million, or 41 cents per share, a year earlier.
Excluding charges, earnings were 99 cents per share, which beat Wall Street’s estimate of 91 cents per share, according to Thomson Reuters I/B/E/S.
Revenue rose to $1.86 billion from $1.67 billion, driven by a 36 percent rise in Australian sales, as well as Trading and Brokerage business activity, Peabody said. It sold 64 million tons in the quarter — slightly more than the 63.5 million sold in the year-ago quarter.
“The bottom line is that Peabody was able to overcome weak met (metallurgical) coal shipments in Australia, with strong results across the board,” said analyst Jeremy Sussman, of Brean Murray Carret & Co. “We’d expect numbers to come up modestly.”
In July, Peabody increased earnings estimates for this year, citing strength in international coal markets, with rising imports in China, India and other parts of Asia for both metallurgical and thermal coal.
The company said year-to-date demand for seaborne metallurgical and thermal coal in the Pacific region is averaging 15 percent above prior-year levels.
China’s coal-fueled power generation is up 19 percent and steel production has risen 15 percent year to date, it said. China’s net coal imports through August are 60 percent above the prior year.
“Given robust economic growth in the second half of 2010, Peabody has raised its full-year expectations for China’s net imports to 135 to 140 million tonnes,” it said.
India’s coal imports increased nearly 30 percent year to date through September and are anticipated to reach 100 million tonnes — 36 percent above 2009, it said.
The strong pace of Australian exports continued during the quarter with year-to-date shipments running an estimated 11 percent above the prior year.
Peabody expects earnings before interest, taxes, depreciation and amortization (EBITDA) to be in the range of $1.85 billion to $1.9 billion — up from $1.7 billion to $1.9 billion.
Adjusted earnings per share for full-year 2010 are expected to be $2.95 to $3.15, an increase from a range of $2.60 to $3.15. Analysts currently expect 2010 earnings of $3.03 per share. (Reporting by Steve James; editing by Dave Zimmerman and Andre Grenon)