Shares of Peabody Energy (BTU -0.71%) shot through the roof today, gaining as much as 9.8% as of 2:15 p.m. EDT. I'd urged investors to watch the coal stock closely, as investor interest was already building up in the days ahead of its quarterly earnings release on July 29, thanks to the recent surge in coal prices. Peabody Energy didn't disappoint its bulls.
Thursday morning, Peabody Energy released its second-quarter earnings report. Here are some notable numbers:
- Revenue: Up 15.4% year over year to $723.4 million
- Net loss: $28.6 million, versus $1.5 billion in the year-ago quarter
- Long-term debt: Down 12% to $1.3 billion from $1.5 billion as of Dec. 31, 2020
With those numbers, Peabody Energy handily crushed consensus estimates on both its top and bottom line, which sent the stock soaring.
Peabody Energy's outlook for 2021 suggests a better-than-anticipated year ahead. For example, the company's cost-cutting efforts are beginning to show up on its bottom line. In the second quarter, Peabody Energy's selling, general, and administrative (SG&A) expenses declined an impressive 15% year over year, and the company now expects to incur only $80 million in SG&A expenses in 2021, versus $99.5 million last year.
Likewise, Peabody Energy's projected interest expense for the full year has come down, thanks to debt repayment in the second quarter. With management projecting further debt reduction in the coming months and also cutting its capital spending budget to $200 million for the full year, Peabody Energy should be able to generate stronger cash flows this year after a dismal 2020.
Peabody Energy's cost- and debt-reduction efforts are noteworthy. With coal's share in power generation in the U.S. also projected to pick up this year thanks to several factors that have driven coal prices higher, coal suddenly isn't dead anymore.
But those factors may not last long, the transition to renewable energy appears inevitable, and there's only so much Peabody Energy can do to survive the secular trend. While traders and short-term enthusiasts may still want to play around with Peabody Energy shares, long-term energy investors have better opportunities elsewhere.