Peabody Loving Coal (BTU, KOL)

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Peabody Energy Corporation (NYSE:BTU) reported a huge fourth quarter this morning, and the stock is up around 12% as a result. For the full 2008 fiscal year, Peabody reported EPS of $3.63 on income of $948.8 million and revenue of nearly $6.6 billion. Shares of other coal companies are up as well, and even the Market Vectors Coal ETF (NYSE: KOL) is up almost 4% on the news.

While the numbers are big for both the quarter and the year, Peabody’soutlook for next year is somewhat softer based on its customers’inventories, which average about 56 days compared with 50 days a yearago. The company expects inventories to rebalance and demand for steelto pick up as the global economy improves in the second half of theyear. Peabody also expects new coal-fired generation plants to beginoperation and existing plants to run at higher utilization rates.

Whether Peabody’s take on the economy’s recovery is accurate remains tobe seen. It is certainly a rosy picture. If the company is right, coalproducers will enjoy a good year. If it is wrong, the one sector ofthe energy business that looks good now could falter.

Paul Ausick
January 27, 2009