Peabody Energy Corp.'s (BTU) second-quarter profit rose 38% as higher coal prices and increased sales in Australia outweighed the drag from disruptions due to flooding in the U.S.

The largest U.S. coal producer by output raised its full-year earnings projection to $4.20 to $4.60 a share. Its April guidance called for $3.50 to $4.50. For the third quarter, the company predicted earnings of $1.05 to $1.25 cents a share, below analysts' estimated $1.40 a share.

Peabody recently has been named in a set of deals that would expand its access to booming markets in Asia.

Earlier this month, the company made a joint bid with ArcelorMittal (MT, MT.AE) to acquire Australian coal miner Macarthur Coal Ltd. (MCC.AU) for $5.05 billion. Peabody is in negotiations with the Mongolian government to develop the Tavan Tolgoi coal mine, one of the world's largest untapped coal deposits. And last week Peabody said it had entered into an initial agreement with the government of Xinjiang Uighur Autonomous Region in northwestern China to develop a large open-pit coal mine.

Peabody executives left the door open to further acquisitions, with Chief Executive Gregory Boyce on Tuesday highlighting the company's preference for assets that can easily access global export markets.

"We have a high preference for those areas and those products that can access seaborne markets," Boyce said on a conference call to discuss the company's second-quarter results. The company's recently announced developments in China are both "in close proximity to the fastest (growing) and largest coal markets in the world," he added.

Rapid growth in China and India continues to underpin rising global demand for coal for steelmaking and electricity generation.

For the second quarter, Peabody posted a profit of $284.8 million, or $1.05 a share, up from $206.2 million, or 76 cents a share, a year ago. The most recent quarter includes $24.5 million in litigation charges. Excluding remeasurement expenses, earnings from continuing operations rose to $1.11 from 69 cents. The company in April forecast earnings between 85 cents and $1.10, below analyst estimates at the time.

"With another solid quarter, and a sizable guidance raise, we'd expect Peabody to be fairly strong," Brean Murray, Carret & Co. analyst Jeremy Sussman said in a note. "We remain buyers of Peabody."

Revenue rose 21% to $2.01 billion, matching analyst estimates.

Operating margin widened to 22.8% from 19.5%, and operating profit per ton jumped 45%. Revenue per ton in the U.S. increased 3% as revenue per ton in Australia increased 38%.

Flooding and rail transportation constraints limited sales in the U.S. Midwest and Wyoming's Powder River Basin. The company said it also faced increased operating costs in its Australian business because of a stronger Australian dollar and lingering logistical difficulties after widespread flooding earlier this year.

Peabody's also received a boost from strong results in its trading and resources management operations, which posted revenue of $114 million, up 40% from 2010 levels.

Shares were up 0.5% at $60.17 in midday trading. The stock has gained 42% over the past year through Monday's close.

-By Matt Day and Nathalie Tadena, Dow Jones Newswires; 212-416-4986; matt.day@dowjones.com

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