Peabody Energy Corp. (BTU) Tuesday said its second-quarter earnings fell 66% as global recession continued to crimp coal demand, and pegged its 2009 earnings below market forecasts.

The St. Louis-based company and its peers over the past year have been hit hard by a drop in electricity demand and sharply lower steel production, though Peabody said Pacific markets are strengthening, with record net coal imports flowing into China and low stockpiles in India. Chairman and Chief Executive Officer Gregory H. Boyce said as a result of growth in Asia, it expects to increase sales at its Australian operations next year, though it maintained its output guidance for this year.

In the U.S., meanwhile, the company said coal-fired power generation is down more than 9% this year, with stockpiles of coal reaching their highest in years before starting to be drawn down towards the end of June. U.S. coal demand fell to the lowest levels since 2002 in the first quarter, while production slid to mid-2005 levels, according to the Energy Information Administration.

Peabody, one of the world's biggest coal producers, said in a press release that second-quarter U.S. coal output fell nearly 25 million tons year-over-year, but with stockpiles remaining high, "demand growth or additional supply adjustments will be needed to balance the market."

Peabody on Tuesday posted second-quarter profit of $79.2 million, or 29 cents a share, down from $233.3 million, or 85 cents a share, a year earlier. Revenue decreased 12% to $1.34 billion.

Volume sold edged down by 100,000 tons to 59.5 million while U.S. revenue per ton rose 4%. Adjusted earnings, excluding a non-cash charge for remeasuring foreign income taxes prompted by appreciation in the Australian dollar, came in at $135.4 million, or 49 cents a share. Including the charge, income from continuing operations came in at 31 cents a share.

Analysts polled by Thomson Reuters most recently were looking for earnings of 49 cents on revenue of $1.43 billion.

As Peabody reiterated its 2009 production targets, it projected earnings before interest, taxes, depreciation and amortization of $1 billion to $1.2 billion. The mean estimate of analysts surveyed by Thomson Reuters was $1.33 billion.

Dahlman Rose & Co. analyst Daniel Scott said he was surprised Peabody had stuck by its 2009 Australian and U.S. output guidance, since Asian coal markets had improved since April, while the U.S. market for coal to fuel power stations seems to have deteriorated further.

"We had expected a shift to slightly higher Australian and lower U.S. tonnage for the full year based on the divergence in the two markets since the company's last update," Scott wrote in a note to clients.

Shares of Peabody were recently down 5.4% to $32.95.

-By Mark Long and Tess Stynes, Dow Jones Newswires; 212-416-2145; mark.long@dowjones.com