Despite the worldwide push for cleaner energy, fossil fuels such as coal remain relevant. Coal usage in the United States for energy generation has experienced its first year-over-year increase this year, since 2014.
Furthermore, due to the doubling of natural gas prices, U.S. coal prices peaked in mid-November to their highest price since 2009 because producers are unable to keep up with the rising demand for carbon substances. In addition, thermal coal prices tend to rally in winter. And despite China’s intervention to lower coal prices by expanding supply, coal is expected to trade at $159.82 per metric ton by the end of this quarter.
Warrior Met Coal, Inc. (HCC)
HCC in Brookwood, Ala., exports non-thermal metallurgical coal used in the steel industry and markets natural gas as a by-product. The company supplies its metallurgical coal to producers on different continents.
On November 19, HCC priced a private offering of $350 million of 7.875% senior secured notes, due 2028. The company expects to use the net proceeds from the transaction to fund the earlier redemption of its outstanding 8.00% senior secured notes due 2024.
And on October 25, the company declared a regular quarterly dividend of $0.05 per share, which was to be paid to shareholders on November 12. This reflects the company’s strength in its cash position.
For its fiscal third quarter, ended September 30, HCC’s total revenues increased 12.4% year-over-year to $202.47 million. Its net income and net income per share came in at $38.43 million and $0.74, respectively, up substantially from their negative year-ago values. And its adjusted EBITDA improved 524.6% from the same period last year to $104.94 million.
The Street’s $2.38 EPS estimate for the current quarter (ending December 2021), reflects a 477.8% year-over-year increase. Likewise, the Street’s $284.04 million revenue estimate for the current quarter indicates a 33.8% rise from the prior-year quarter.
HCC’s stock has gained 27.3% in price over the past year but has declined 4.9% over the past five days to close Friday’s trading session at $21.07. It is currently trading 25.8% below its 52-week high of $28.40 and below its 50-day moving average of $24.23.
HCC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
HCC has a Momentum grade of A, and a Growth and Quality grade of B. In the 11-stock Coal industry, it is ranked #4. The industry is rated A.
In addition to the POWR Rating grades we have stated above, one can see HCC ratings for Value, Stability, and Sentiment here.
Ramaco Resources, Inc. (METC)
METC is a metallurgical coal producer and seller. The Lexington, Ky., company serves blast furnace steel plants and coke plants, and direct metallurgical coal consumers in the United States. Its development portfolio includes the Elk Creek project and the Berwind property in West Virginia.
On October 26, METC reported the completion of 2022 sales negotiations with its North American customers that should translate to more than $325 million in booked revenue. In addition, the company announced the execution of an asset purchase agreement with companies owned by Coronado Global Resources Inc. to purchase certain assets, which is expected to increase the company’s production capability. METC also declared the initiation of a regular quarterly dividend, to be paid from the first quarter of 2022.
METC’s revenue increased 93.6% year-over-year to $76.38 million in its fiscal third quarter, ended September 30. Its net income and EPS stood at $7.04 million and $0.16, respectively, registering a substantial improvement from their negative year-ago values. And its adjusted EBITDA rose 2,695.1% from the prior-year quarter to $17.81 million.
Analysts expect METC’s EPS to improve 518.2% year-over-year to $0.46 in the current quarter (ending December 2021). Likewise, the Street expects its revenue to increase 69.7% from the prior-year quarter to $86.78 million.
The stock has gained 247.7% in price over the past year to close yesterday’s trading session at $11.09. However, it has declined 9.4% over the past five days. METC is currently trading 44.5% below its 52-week high of $19.99.
It is no surprise that METC has an overall B rating, which translates to Buy in our POWR Rating system. The stock has an A grade for Momentum, and a B grade for Growth and Quality. It is ranked #5 in the Coal industry.
To see the additional POWR Ratings for Value, Stability, and Sentiment for METC, click here.
Hallador Energy Company (HNRG)
HNRG and its subsidiary produce steam coal from the Illinois basin, basically for the electric power generation industry. The Terre Haute, Ind., company owns two underground mines in Oaktown, Indiana, and engages in gas exploration activities.
The company expects prices to increase approximately $3 per ton in the fourth quarter and expects production cost pressures to dissipate over the next year.
For its fiscal third quarter, ended September 30, HNRG’s net income increased 315.3% year-over-year to $7.99 million. Its total revenues climbed 22.3% from the prior-year quarter to $79.82 million. And its adjusted EBITDA rose 20.1% from the same period last year to $20.52 million.
A $0.11 consensus EPS estimate for the current year (fiscal 2021) indicates a 155% year-over-year increase. Likewise, the $248.90 million consensus revenue estimate for the current year reflects a 1.5% improvement from the prior year.
The stock has gained 178.8% in price over the past year but declined 4.1% over the past five days to close Friday’s trading session at $2.30. It is currently trading 49.8% below its 52-week high of $4.58.
HNRG’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. HNRG has an A grade Value, Momentum, and Sentiment, and a B grade for Quality. It is ranked #3 in the Coal industry.
Click here to see the additional POWR Ratings for HNRG (Growth and Stability).
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HCC shares were trading at $21.60 per share on Monday morning, up $0.53 (+2.52%). Year-to-date, HCC has gained 2.35%, versus a 27.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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