There's was no shortage of bad news in the coal industry in 2013 and industry heavyweight Peabody Energy (NYSE:BTU) wasn't immune. But some of the bad news at the globally diversified coal miner has nothing to do with weak commodity prices and could actually help make 2014 look comparatively good.

Core weakness
Peabody is going to post weak results in 2013. Through the first nine months of the year the company's top line was down about 13% despite a 1% increase in tons sold. Earnings, meanwhile, were down about 90%. Even the best fourth quarter in the company's history wouldn't fix this problem, largely driven by falling coal prices in an industry with high fixed costs.

Peabody isn't alone in its troubles. Coal mine leaser Natural Resource Partners (NYSE:NRP) just announced a dividend cut. Although the company expects 2013 results to be within its previous guidance, discussions with its lessees left it concerned about the still weak coal market.

The partnership's diversification efforts, including buying non-working interests in natural gas wells and investing in a soda ash business, helped to offset coal weakness in 2013. Which is why results should look decent for 2013. But "We did not see the recovery in the coal markets that we thought might occur over the course of 2013," according to Natural Resource Partners' COO Nick Carter.

Clearly, Peabody won't be alone when it reports earnings later this month. This lingering weakness is why CONSOL Energy (NYSE:CNX) just sold thermal coal operations to Murray Energy for $3.5 billion. That sale allowed CONSOL to refocus on growth businesses like natural gas and export coal.

CONSOL's sale will make its 2013 numbers a bit of a mess when it reports full-year earnings because it will create one-time items. And, regardless, with a nine-month loss of $0.34 a share, 2013 will be one to forget for CONSOL, too. The real news to watch will be what to expect going forward from a company that has undergone a transformational change.

The baby with the bathwater
Like CONSOL, however, there's been more going on at Peabody this year. For example, there was a $300 million settlement related to the Patriot Coal bankruptcy. As if that weren't enough, the company just announced that results would fall short of its guidance because of a now resolved labor dispute and troubles with the commissioning of a new mine.

CEO Gregory H. Boyce, however, sums up the impact of these issues very well: "While these items will affect our current results, our initiatives support our strategy of productivity improvements and cost containment and will better position the company going forward." In fact, the timing couldn't have been better!

With all of the bad news dumped into 2013 results, which investors already expected to be weak, 2014 is set up to be a relatively strong year. That's largely because year-over-year comparisons will be easier than they otherwise would have been. And the two mines at the heart of the fourth quarter pre-announcement should both be producing coal, too, boosting sales.

Looking forward
At the end of the day, weak earnings should be expected across the board in the coal industry as earnings season gets under way. The real information will be in the outlooks provided for 2014.

Natural Resource Partners' prognostication is for another tough year for coal miners. But watch this partnership's diversification efforts, that's where its future lies. CONSOL's own efforts to refocus around drilling means that the company will be a very different animal in 2014. Getting a handle on what CONSOL has become after the fourth quarter mine sales will be the key takeaway to look for.

Peabody, meanwhile, is still just a coal miner. And 2013's results are filled with one-off items. Luckily those things should make 2014 look better. Still, keep a close eye on management's outlook to see if it is as bleak as the one provided in Natural Resource Partners' dividend cut announcement.

 

Reuben Brewer has a position in Natural Resource Partners. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.