Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of coal miner Peabody Energy (BTU) climbed as much as 15% today after releasing earnings.
So what: In the third quarter, revenue grew 4% to $2.06 billion, but earnings fell 84% to $42.9 million, or $0.16 per share. Income from continuing operations was $0.46, which was ahead of the $0.34 analysts had expected.
Now what: According to management, the coal market is stabilizing after being battered by low prices of natural gas. Management now expects earnings of $2.10 to $2.30 for the year, which is well ahead of the consensus estimate of $1.86.
This doesn't eliminate the long-term challenges for coal, but it does indicate that short-term pressure is manageable. It's the long-term challenges that will keep me from buying today, though. U.S. demand for thermal coal is projected to fall 120 million tons, and with natural gas still abundant and inexpensive, I don't think earnings will grow significantly in the future.
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