BTU - Peabody Energy - Income per share soared past the consensus estimate by 44%

Peabody Energy Corp. (BTU) is a coal company that is also a burning hot Growth & Income pick. The company recently declared a regular quarterly dividend of six cents per share, which translates into a yield that matches the industry average at 0.4%. Peabody posted first-quarter results. Quarterly revenues increased 15% to a record $1.28 billion on a year-over-year basis. Income from continuing operations of 26 cents per share soared past the consensus estimate by 44%. The company’s ROE of 16% signals growth and is higher than the industry average of 15%.

Full Analysis

Peabody Energy is the world's largest private-sector coal company. Its coal products fuel approximately 10 percent of all U.S. electricity generation and 2 percent of worldwide electricity.

Last year Peabody shipped 238 million tons of coal. The company has 340 electricity generating and industrial customers in nearly 40 states and 19 countries.

Income

BTU recently declared a regular quarterly dividend of six cents per share. The dividend is payable on May 29, 2008 to holders of record on May 8, 2008. The company is yielding 0.4%, which is in line with the industry average.

Growth

A couple days before the dividend declaration, in late April, the company posted first-quarter results. Quarterly revenues increased 15% to a record $1.28 billion on a year-over-year basis. Income from continuing operations of 26 cents per share soared past the consensus estimate by 44%

"Peabody's strategy to expand our global platform and target high-growth, high-demand markets is delivering significantly improved performance based on very strong coal markets and recent international price settlements," said Peabody Chairman and Chief Executive Officer Gregory H. Boyce. "We believe that the outstanding global fundamentals for coal are resulting from structural changes in the supply-demand balance. Growing economies are being fueled by coal and world coal expansion cannot keep pace with demand."

The company’s return on equity (ROE) of 16% signals growth and is higher than the industry average of 15%.

Growth should continue to be the theme for BTU as its earnings per share are expected to grow by 18%, which is in line with the industry average.

Higher Estimates

Peabody increased its full-year 2008 targets, pegging income from continuing operations at $2.20 to $3.00 per share.

Wall Street lifted forecasts to be in line with the company’s outlook. Ten out of 14 covering analysts upped full-year 2008 estimates to $2.43 per share from last month’s $1.91. The most accurate projection is a more bullish $2.50.

Content Courtesy: Zacks Investment Research

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