Coal prices remained elevated because of the global energy shortage and rising natural gas prices. Moreover, as Western countries abandoned Russian coal shipments, the supply disruptions have caused the coal prices to surge. Newcastle coal futures, the primary traded benchmark for coal in Asia, is currently trading around $400 per tonne, just $30 away from the record high.
Furthermore, surging natural gas prices relative to coal increased demand for coal-fired power generation. The energy-dependent European countries, including Germany, Austria, and the Netherlands, are considering switching back to coal to fill the gaps in the supply chain.
According to a report by The Business Research Company, the global coal market is expected to reach $900.78 billion in 2026, growing at a CAGR of 8.7%. The strong coal demand, constrained energy supplies, and high pricing environment should boost the profitability and growth of coal companies in the United States.
Arch Resources, Inc. (ARCH)
ARCH produces and sells thermal and metallurgical coal from surface and underground mines. The company sells its products to industrial, steel, and utility producers in the U.S., Europe, Asia, Central, and South America, and Africa. ARCH operates more than seven active mines.
On May 25, ARCH closed its previously announced privately negotiated exchanges of $125.20 million principal amount of its 5.25% senior convertible notes due 2025 for $130.10 million in cash and approximately 2.6 million shares of ARCH common stock. As a result, the company has reduced its indebtedness and eliminated future interest payments.
“With these transactions, Arch has strengthened and simplified its capital structure in a way that should drive significant long-term value for our shareholders,” said Paul A. Lang, ARCH’s CEO and President.
ARCH’s revenues increased 142.8% year-over-year to $867.94 million in the fiscal 2022 first quarter ended March 31, 2022. The company’s adjusted EBITDA rose 938.9% year-over-year to $320.98 million. In addition, its net income and earnings per share came in at $271.87 million and $12.89, registering increases of 4,599.7% and 3,322.5% from the prior-year period, respectively.
Analysts expect ARCH’s revenue for the fiscal 2022 second quarter ended June 2022 to come in at $1.06 billion, representing a 135.5% rise from the same period in 2021. Also, Street expects the company’s EPS for the to-be-reported quarter to come in at $23.41, representing a 1,282.7% increase year-over-year.
The company has an impressive revenue and earnings surprise history as it has surpassed the consensus revenue estimates in each of the trailing four quarters and the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 64.1% year-to-date and 168.1% over the past year to close the last trading session at $143.86.
ARCH’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Peabody Energy Corporation (BTU)
BTU engages in the coal mining business in the United States, Australia, Japan, Taiwan, India, Indonesia, China, Vietnam, South Korea, and internationally. The company operates through four segments: Seaborne Thermal Mining; Seaborne Metallurgical Mining; Powder River Basin Mining; and Other U.S. Thermal Mining. Also, the company provides transportation-related services.
On April 6, BTU began a gold exploration drill program at the Tooth area of the Dixie Halo project located near its northern border, immediately south of the Great Bear Resources/ Kinross LP fault gold discovery area. The new drill program is expected to boost the company’s profitability.
In the fiscal 2022 first quarter ended March 31, 2022, BTU’s revenue grew 6.2% year-over-year to $691.40 million. The company’s adjusted EBITDA amounted to $327.50 million, up 436% year-over-year.
Furthermore, net cash provided by investing activities and financing activities came in at $35.20 million and $132.20 million, registering a growth of 137.8% and 308.9% from the prior-year period, respectively.
The consensus revenue estimate of $1.45 billion for the fiscal 2022 second quarter (ending September 2022) represents an increase of 113.7% from the prior-year period. The $2.95 consensus EPS estimate for the ongoing quarter indicates a 44.7% year-over-year rise.
BTU has gained 88.5% year-to-date and 141% over the past year to close the last trading session at $21.38.
BTU’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, equating to a Buy in our proprietary rating system.
BTU has a grade of A for Growth and B for Value and Momentum. Within the A-rated Coal industry, it is ranked #8 of 11 stocks. Click here to see additional POWR Ratings (Stability, Quality, and Stability) for BTU.
Alpha Metallurgical Resources, Inc. (AMR)
AMR is an American mining company. It produces, processes, and sells met and thermal coal in Virginia and West Virginia. Primarily, AMR is engaged in supplying metallurgical products to the steel industry. The company operates over 20 active mines and eight coal preparation and load-out facilities.
In June, AMR announced several financial updates. On June 3, the company made a voluntary prepayment of $99.40 million on its term loan, which eliminated all remaining principal and paid the loan in full. Also, as previously announced, AMR’s Board of Directors authorized a $600 million share repurchase program. As of June 3, it has acquired 860,934 shares of common stock.
Furthermore, AMR received a reduction of $40.10 million in collateral requirements related to its self-insured workers’ compensation at certain locations in West Virginia. In addition, as part of routine surety program review and negotiation, it received $16.50 million in surety collateral requirements. These developments might improve the company’s financial position.
AMR’s revenues increased 177.5% year-over-year to $1.07 million in the fiscal 2022 first quarter ended March 31, 2022. Its income from operations improved 2,845.7% year-over-year to $453.09 million.
Its adjusted EBITDA grew 1,643.3% from the year-ago value to $503.80 million. The company’s net income and net income per share came in at $400.89 million and $20.52, up 1,317.5% and 1,246.4% year-over-year, respectively.
The $4.44 billion consensus revenue estimate for the fiscal year 2022 (ending December 2022) represents a 96.6% improvement from the prior year. Analysts expect AMR’s EPS for the current year to increase 549.3% year-over-year to $99.34. The company has topped the consensus revenue estimates in each of the trailing four quarters, which is impressive.
AMR’s shares have gained 117.6% year-to-date and 502.9% over the past year to close the last trading session at $137.09.
AMR’s POWR Ratings reflect a strong outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
AMR has a grade of A for Growth. It has a B grade for Quality, Momentum, and Value. Within the Coal industry, it is ranked #3. Click here to see AMR’s POWR Ratings for Sentiment and Stability.
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ARCH shares were trading at $145.08 per share on Tuesday afternoon, up $1.22 (+0.85%). Year-to-date, ARCH has gained 66.75%, versus a -16.87% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...
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