Why Peabody Energy's Shares Popped

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 (NYS: 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.

Interested in more info on Peabody Energy? Add it to your watchlist by clicking here.

The article Why Peabody Energy's Shares Popped originally appeared on Fool.com.

Fool contributor Travis Hoium has no positions in the stocks mentioned above. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

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