Peabody Energy Corp.'s (BTU) third-quarter profit rose roughly in line with analysts' expectations, but shares of the company sank after ArcelorMittal (MT, MT.AE) said it was backing out of a planned joint acquisition of an Australian coal company.

Arcelor's move put Peabody in position to acquire Macarthur Coal Ltd. (MCC.AU) on its own, and Peabody's shares slid as investors digested the news.

Peabody shares, down 36% year to date, recently traded down 7.9% at $37.69.

"While we anticipated a positive joint venture with ArcelorMittal, we have always preferred a larger ownership," Peabody Chief Executive Gregory H. Boyce said.

Arcelor, in a statement Tuesday, said it had "determined that it would no longer be appropriate to allocate substantial capital to the acquisition of a non-controlling, minority business interest."

On Monday, Peabody, the world's largest private-sector coal company, and Arcelor, the world's top steelmaker, completed their roughly $5.05 billion acquisition of the Australia-based coal-mining company. Peabody said it was hoping the Macarthur deal would increase its access to fast-growing Asian markets.

"The Macarthur acquisition expands Peabody's presence in the highest-growth coal markets with a quality metallurgical-coal product," Boyce said. "It provides a large resource base, significant potential synergies and a major growth pipeline."

Lucas Pipes, an analyst with Brean Murray Carret & Co., said in a note that investors are likely to be "taken aback" by the Macarthur news, as Peabody will likely have to offer shares as well as increase its debt load to finance the deal. "Given the current uncertainty in the global economy, we believe that investors will initially view this development with skepticism," Pipes said.

Despite recently strong earnings, Peabody faced a short-term setback in August, when a cave-in blocked the main entrance at one of its Australian mines. The company lowered its third-quarter and full-year earnings guidance, saying the mine's closure would reduce shipments and raise costs.

U.S. coal producers have seen their stocks plummet this year as the companies have battled against rising costs and production problems. Last week, Patriot Coal Corp. (PCX) said its third-quarter loss widened as thermal-coal sales dropped and operating costs rose.

Peabody reported earnings of $274.1 million, or $1 a share, up from $224.1 million, or 83 cents a share, a year earlier. Last month, the company forecast downbeat adjusted earnings of between 70 and 90 cents a share.

Revenue rose 9.2% to $2.04 billion, above market expectations of $2.02 billion. Peabody's operating margin fell to 18.5% from 23.8%.

Global sales declined 0.6% to 63.6 million tons. Revenue per ton increased 6.5% in the U.S. and 15% in Australia.

Peabody lowered the higher end of its target total sales for the year to 245 million short tons from 255 million tons.

-By Matt Day and Ben Fox Rubin, Dow Jones Newswires; 212-416-4986; matt.day@dowjones.com

-Alex MacDonald contributed to this article.

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