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Peabody Energy Wipes Out Estimate

But first-quarter guidance is soft.

Peabody Energy

(BTU) - Get Peabody Energy Corporation Report

, one of the country's biggest coal companies, said fourth-quarter net income rose 138% from a year ago, boosted by record production and high coal and fuel prices.

The St. Louis-based company earned $162.2 million, or $1.21 per share, in the quarter, compared with $67.9 million, or 51 cents a share, a year ago. Revenue rose 21% to $1.2 billion. Analysts surveyed by Thomson First Call were forecasting earnings of $1.05 a share on sales of $1.22 billion in the most recent quarter.

Peabody offered mixed guidance, forecasting earnings of 60 cents to 90 cents a share in the first quarter and $3.75 to $4.85 a share for full-year 2006. Analysts were forecasting earnings of $1.03 a share for the quarter and $4.46 a share for the year.

Lower production and higher expenses for mine operations were cited for the first-quarter prediction.

After falling as low as $86.65 earlier, Peabody's shares were recently trading for $92.10, up 42 cents on the session.

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High natural gas prices have sparked a renewed interest in coal and compelled utilities to expand or build their coal plants. There are 129 coal-fired electricity plants planned around the country, according to the Energy Department. High steel production, driven in large part by growing Asian economies and the petroleum boom, has also driven up the demand for coal.

After a decades-long slump in coal prices, mining companies are enjoying record profits and are plowing the money into new mines, electricity generators and repurchasing stock. Peabody, which is transforming itself into an integrated coal company that mines coal and markets and produces electricity, expects to double the number of mines it operates in the next five years.

"U.S. and global market fundamentals are exceptional," said Gregory Boyce, Peabody's president and chief executive officer. "Amid expensive oil and natural gas, we are experiencing record coal demand to satisfy electricity plants that are operating at higher rates."

Coal costs about $3 per million British thermal units, compared with $10 for gas.

Peabody set production records last year at its eight mines that represent over 60% of total production. During the quarter, 61.4 million tons of coal were sold, up from 59.7 million tons in 2004. Peabody sold 239.9 millions tons of coal in 2005, a 5.6% increase over the previous year.

As the largest producer in Wyoming's Powder River Basin, a booming area for low-sulfur coal, Peabody has enjoyed prices that have more than tripled in the past year to $20 per ton. The Powder River Basin represents about two thirds of domestic coal production at 385.5 million tons.

Still, the miner has run into problems getting all of its coal to East Coast markets because of rail derailments and other problems. Transportation delays are expected to linger this year and hit utilities, which have historic low levels of coal supplies, hard. Demand is expected to rise 15% this year for Powder River coal, but the railroads have told Boyce they will likely only move half of that amount.

The railroads did not move 25 million tons of coal out of the Powder River Basin last year, Boyce estimated in a conference call Thursday. About 8 tons of that total belonged to Peabody.