Peabody (BTU) Q3 2026 earnings review
Export prices lift Peabody sales, but mine faults cut output
Higher export coal prices lifted Peabody's revenue, but underground rock faults and weak US power-plant demand forced deep cuts to its full-year plan. Third-quarter revenue rose 8% from a year ago to $1.10 billion and Adjusted EBITDA reached $98 million, as Australian thermal export prices topped $100 per ton. However, rock faults at the flagship Centurion steelmaking coal mine in Australia worsened late in the quarter, pushing steelmaking coal unit costs 50% above last year and well above the company's own plan.
| Revenue | $1,096.3M +8.3% from a year ago |
|---|---|
| Adjusted EBITDA | $97.5M -2.0% from a year ago (+306% from Q2) |
| Seaborne Met cost per ton | $162.45 planned $130–$140 (+50% from a year ago) |
| Full-year volume and cost outlook | Cut PRB -7.5M tons; Met -0.6M tons and cost +$15/ton |
⚖️ Verdict: 🔴 Bearish
The story got worse because both pillars of the second-half recovery broke in the full-year outlook. Instead of clearing the Centurion rock faults in the third quarter, Chief Executive Jim Grech reported that October output dropped to 45,000 tons, while weak US coal burn forced a 7.5 million ton cut to Powder River Basin volume. One bright spot: seaborne coal prices stayed strong enough to return the steelmaking coal division to a small operating profit despite the cost overrun.
The question now is whether Centurion's geological problems are a one-panel setback or a flaw that delays the mine's multi-year ramp. One view is that up to $12 million in equipment upgrades and the third-quarter 2027 move to the next panel will restore production; the other is that deferring $30 million of northern panel development will hold down 2027 and 2028 output. Fourth-quarter shipments against the cut 0.3 to 0.5 million ton target will provide the first test.
🐂 Bull Case
Export Prices Over $100 Lifted Seaborne Thermal Profit
Seaborne Thermal, which mines power-plant coal in Australia for export and local utilities, carried the quarter's operating profit. Export prices rose past $100 per ton, lifting the division's profit per ton by 24% from last quarter to $21.05.
- Export realized price: $100.37 per ton, up 31.1% from a year ago and 4.7% from last quarter
- Segment Adjusted EBITDA (operating profit before depreciation, reclamation and one-offs): $65.5 million, up 59.8% from a year ago
- Q4 cost target: $46 to $51 per ton, down from $56.58 in the third quarter
The division earned two-thirds of total Adjusted EBITDA because export prices climbed while unit costs fell $1.35 per ton. Peabody raised its full-year export target by 0.2 million tons and expects fourth-quarter shipments to rise to 3.6–3.8 million tons.
What to watch: the realized price on the 2.4 million unpriced export tons in the fourth quarter. A price near $100 per ton would combine with the lower cost plan to drive the fourth-quarter cash rebound management expects.
Higher Coking Prices Returned Steelmaking Coal to Profit
Seaborne Metallurgical, which sells coking coal used to make steel, returned to a positive Adjusted EBITDA of $5.2 million after losing $17.0 million last quarter. A standing worry was that falling benchmark coal indices in August would hurt third-quarter revenue, but realized prices climbed instead.
Average revenue per ton jumped $16.79 from the second quarter to $164.83, up 35.8% from a year ago. Shipments of 2.2 million tons beat the 1.9–2.1 million ton plan because the Metropolitan mine ramped up after an equipment move, and Peabody locked in prices on another 2.3 million tons for 2026 at an average of $153.00 per ton.
What to watch: fourth-quarter revenue per ton, which Peabody plans at about 70% of the Australian premium hard coking coal index. Because unit costs are planned at $150 to $160 per ton, the division needs realized prices above $155 per ton just to stay profitable.
🐻 Bear Case
Centurion Rock Faults Worsened and Pushed Costs Up
Centurion, Peabody's flagship Australian steelmaking coal mine, is the centerpiece of its growth story. Three months ago, management expected to clear a rock fault zone during the third quarter and cut steelmaking coal costs to $130–$140 per ton. Chief executive Jim Grech noted "higher-cost faulted conditions at Centurion, which slowed advance rates, although the mine still reached its third quarter sales targets."
- October Centurion production: ~45,000 tons, after encountering "more problematic faulting than anticipated across multiple areas of the panel"
- H2 Centurion sales volume: ~0.88 to 1.08 million tons by our math (0.58M in Q3 plus 0.3–0.5M planned in Q4), down from the 1.5–2.0 million ton H2 target
- Seaborne Metallurgical Q3 cost: $162.45 per ton, up 50.0% from a year ago and $27.45 above the middle of the Q3 plan
That cost jump contradicts the plan that Centurion volume would dilute fixed costs in the second half. Instead of clearing the faults in the third quarter, the miner cut full-year steelmaking coal volume by 0.6 million tons, raised full-year unit cost by $15 per ton, and delayed $30 million of northern panel development.
What to watch: Centurion's fourth-quarter shipments against the new 0.3 to 0.5 million ton plan and whether a $1.5 to $2 million power upgrade fixes advance rates before the third-quarter 2027 equipment move. Another shortfall would show the rock faults will weigh on 2027 output too.
Weak US Coal Burn Forced a 7.5M Ton Cut
Peabody's US thermal mines sell coal to domestic power plants under fixed-price contracts, led by the Powder River Basin (PRB) in Wyoming. Last quarter, the full-year outlook implied by our math that PRB shipments would jump to 25.4 million tons in the fourth quarter at a unit cost below $11.60 per ton.
Third-quarter PRB shipments reached only 19.6 million tons, missing the 22.0 million ton plan because of "lower-than-anticipated coal burn." Peabody cut its full-year PRB target by about 7.5 million tons and trimmed Other U.S. Thermal volume by 0.2 million tons, citing "weaker 2026 US coal burn." Even priced PRB volume fell by 2.3 million tons by our math, to 78.5 million tons.
Lower shipments spread fixed mining expenses over fewer tons, so third-quarter PRB costs of $12.94 per ton missed the $11.75–$12.25 plan and drove a $1 per ton increase in the full-year cost outlook. Consequently, PRB Adjusted EBITDA dropped 71.0% from a year ago to $15.0 million.
What to watch: whether fourth-quarter PRB shipments reach the 19.5 to 21.5 million ton range. A third straight volume miss would mean utility stockpiles remain full heading into 2027 contract talks.
Debt Paydowns Drained Cash While Operations Burned Money
"Eliminating the remaining 2028 convertible notes with cash continues our policy of returning capital to shareholders and reduces shareholder dilution by 4 million shares while preserving financial flexibility as operating performance improves," finance chief Mark Spurbeck said. Retiring convertible debt prevents new shares from being created, which bulls view as smart balance-sheet cleanup.
However, Peabody paid for those debt retirements out of its cash balance because operations generated no cash. In the third quarter, operating cash flow was negative $1.4 million and capital spending was $59.8 million, resulting in negative $61.2 million of free cash flow by our math. Paying $58.1 million for the notes plus dividends cut unrestricted cash by $92.0 million from June to $434.3 million, and redeeming the final $39.9 million of notes in November will take another cash outlay.
What to watch: fourth-quarter operating cash flow and whether customers pay down the $383.8 million in accounts receivable. Without a fourth-quarter cash rebound, funding debt redemptions and dividends will keep shrinking the cash cushion.
Risks This Quarter Didn't Answer
Three standing risks from prior quarters received no substantive update in the third-quarter earnings release and remain open ahead of the quarterly filing.
- Terminated acquisition arbitration: Peabody recorded $3.9 million of legal and related costs ($9.2 million year-to-date), but gave no update on the seller's ~$755 million damages claim or the unreturned $46 million deposit.
- Centurion securities class action: no mention of the shareholder lawsuit over Centurion startup disclosures; the quarterly 10-Q legal footnote will show if any loss range is now estimable.
- Unhedged diesel costs: management noted that higher diesel prices hurt PRB unit costs in the quarter, and the quarterly filing will show whether Peabody has added any fuel hedges for 2027.
💲 Other KPIs
Peabody's operating loss narrowed from $105.4 million last quarter and $81.4 million a year ago. The improvement from last year came because costs from a terminated acquisition fell by 5.0 percentage points of revenue (from $54.0 million to $3.9 million), while regular operating costs and expenses rose by 0.8 percentage points of revenue to 89.4%.
Uncollected customer bills rose 21.9% since December to $383.8 million (up $55.0 million from June), while coal and supply inventories rose 17.6% to $450.5 million. Tying up cash in unsold coal and unpaid bills explains why third-quarter operating cash flow stayed negative at -$1.4 million even though Adjusted EBITDA jumped from $24.0 million to $97.5 million.
Weighted average diluted shares ticked up 0.3% from 121.7 million a year ago and 122.0 million in the second quarter. Because Peabody reported a net loss in all three periods, potential shares from convertible notes are excluded from the diluted count; retiring the 2028 notes removes up to 9.7 million shares that would dilute stockholders in profitable quarters.
🔮 Guidance
Raised on volume, unchanged on cost. The middle of the full-year volume plan moved up 0.1 million tons to 12.8 million, with export volume raised 0.2 million tons to 8.3–8.5 million (up from a 12.5 million ton midpoint in Q1). Fourth-quarter volume of 3.6–3.8 million tons and costs of $46–$51 per ton improve on Q3's 3.1 million tons and $56.58 cost.
Cut on both volume and cost. Peabody lowered full-year volume by 0.6 million tons and raised expected costs by $15 per ton due to Centurion rock faults. It is the third straight cost increase this year: the midpoint moved from $113 per ton at year-end, to $128 in Q1, $137.50 in Q2, and $152.50 now (+$15, +$9.50, +$15). Q4 sales are planned at ~70% of the benchmark index.
Cut on volume and raised $1.00 per ton on cost. Full-year volume fell by 7.5 million tons at the middle of the range because of weak US coal burn, after holding at 85.0 million tons in Q1 and Q2. Fourth-quarter shipments are planned at 19.5–21.5 million tons at an average price of $13.75 per ton ($13.70 for the full year), down from 22.3 million tons a year ago.
Trimmed on volume, unchanged on full-year cost. The middle of the full-year volume range fell by 0.2 million tons to 13.5 million, fully priced at $57.50 per ton (up from $56.70 in Q2). Fourth-quarter shipments are planned at 3.6–4.0 million tons at an average price of $59.00 per ton and costs of $48–$52 per ton, compared with $52.18 in Q3.
Cut by $40 million. After holding the target at $340 million for three quarters, Peabody reduced planned capital spending by $40 million, including $30 million at Centurion from delaying development of the northern panels. With $203.6 million spent in the first nine months, the outlook implies $96.4 million of fourth-quarter capital spending by our math, down 26.2% from $130.6 million in Q4 2025.
Unchanged for a fourth straight quarter. Selling and administrative expenses totaled $83.7 million through nine months, which leaves $31.3 million for the fourth quarter by our math, up 2.6% from $30.5 million a year ago. Full-year cash spending on mine reclamation (asset retirement obligations, or ARO) stays at $65 million.
❓ Key Questions
How long will the northern panel delay slow Centurion's ramp?
Peabody cut $30 million of 2026 capital spending at Centurion by deferring development of the northern panels and moved the next longwall transfer to Q3 2027. Does this delay push back the 4.7 million ton annual production target previously set for 2028?
Why did priced Powder River Basin volume fall by 2.3M tons?
Last quarter Peabody reported 80.8 million tons of 2026 PRB coal priced at $13.65 per ton; now it lists 78.5 million tons priced at $13.70. Did utilities cancel contracted tons or defer deliveries into 2027, and did Peabody collect any buyout fees?
What is the standalone unit cost at Centurion right now?
Seaborne Metallurgical costs hit $162.45 per ton in Q3 and are planned at $150–$160 in Q4 on only 0.3–0.5 million Centurion tons. How much did Centurion lose in Q3, and what monthly production rate does it need just to break even?
What is the status of the rare earths pilot plant?
After highlighting Department of Energy and Wyoming grants for rare earth elements in Q1 and Q2, the Q3 release made no mention of the program. Has Peabody committed any capital or set a timeline for pilot testing?