Shares of coal miner Peabody Energy (BTU 0.81%) dropped sharply at the open of trading on Thursday, quickly losing 17% of their value. The big hit here came from the company's pre-open earnings release. Investors were clearly displeased with the update.
Peabody Energy reported first-quarter 2021 revenue of roughly $651 million. That was short of analyst estimates, which were calling for $660 million, and well below the $846 million in revenue during the first quarter of 2020. Management highlighted both lower volumes and pricing, which is never a good combination. On the bottom line, Peabody posted a per share loss of $0.79 from continuing operations. That was roughly in line with analyst expectations, but hardly a good showing.
To be fair, the coal sector has been under incredible pressure in recent years because of the push toward cleaner alternatives, including natural gas. The pandemic didn't help the situation. Given the backdrop, Peabody is doing the best it can, including working to shore up its balance sheet and streamline operations.
Those are small positives, however, when put up against the company's weak top and bottom lines. Meanwhile, the outlook Peabody provided for the rest of 2021 was mixed at best, with the expected strengthening in the metallurgical coal business likely to be weighed down by its thermal coal operations.
Investors don't like it when companies are struggling to turn a profit in an out-of-favor industry. And that's exactly what the situation is at Peabody today. It's no shock that the stock sold off on the first-quarter earnings update. All but the most aggressive long-term investors would probably be better off watching this company from the sidelines.