Europe is increasingly turning toward coal as an energy source to replace Russian gas supplies. Germany, among other European nations, has indicated its reliance on coal. This switch to coal might translate to higher prices.
The gas cost has begun to rise once again after Russian gas flows to Europe via the Nord Stream 1 pipeline fell. According to Rystad Energy analyst Fabian Ronnigen, coal is the cheaper energy source, so its utilization could remain high.
On top of it, the International Energy Agency (IEA) noted that roughly $105 billion was invested in the coal supply chain in 2021. Moreover, the global coal supply investment is projected to grow another 10% in 2022 as tight supply attracts new projects. According to a Technavio report, the global coal mining market is expected to grow by $64.68 billion at a 2.2% CAGR until 2025.
Given this backdrop, fundamentally strong coal stocks SunCoke Energy, Inc. (SXC), China Shenhua Energy Company Limited (CSUAY), and Alpha Metallurgical Resources, Inc. (AMR) might be ideal buys amid the market plunge. These stocks have posted gains year-to-date, while the S&P 500 declined 20.4%.
SunCoke Energy, Inc. (SXC)
SXC is an independent producer of coke that offers metallurgical and thermal coal. The company operates through three broad segments Domestic Coke; Brazil Coke; and Logistics. It also provides handling and mixing services to its customers.
In May, SXC declared a dividend of $0.06 per share of its common stock, which was payable to shareholders on June 1. This reflects upon the company’s cash generation and shareholder return ability.
SXC’s sales and other operating revenue increased 22.2% year-over-year to $439.80 million in the first quarter ended March 31. Its operating income grew 27.2% from the year-ago value to $48.60 million, while net income attributable to SXC improved 78.8% year-over-year to $29.50 million. Earnings attributable to SXC per common share increased 75% from its year-ago value to $0.35.
The consensus EPS estimate of $0.94 for the fiscal year 2022 indicates an 80.8% improvement year-over-year. The consensus revenue estimate of $1.77 billion for the same fiscal year reflects a 21.5% increase from the same period last year.
The stock has gained 1.2% year-to-date and marginally over the past five days to close its last trading session at $6.67.
SXC’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
SXC is rated an A in Sentiment and a B in Value, Momentum, and Quality. Within the A-rated Coal industry, it is ranked #1 of 11 stocks.
To see additional POWR Ratings for Growth and Stability for SXC, click here.
China Shenhua Energy Company Limited (CSUAY)
CSUAY, based in Beijing, China, is a coal and power producer that operates through its segments of Coal; Power; Railway; Port; Shipping; and Coal Chemical. The company engages in the coal and power, railway, port, shipping, transportation, and coal-to-olefins businesses.
In the first quarter ended March 31, CSUAY’s revenue increased 24.1% year-over-year to ¥83.90 billion ($12.51 billion). Its gross profit grew 54.9% year-over-year to ¥29.70 billion ($4.43 billion), while its profit for the period rose to ¥23.51 billion ($3.51 billion), representing an increase of 62.6% year-over-year. The company’s EPS increased 66.8% from the prior-year period to ¥0.996.
Analysts expect CSUAY’s revenue for the fiscal year 2023 to be $50.57 billion, indicating a marginal year-over-year growth.
CSUAY has gained 41.4% over the past year and 34.8% year-to-date to close its last trading session at $12.58.
It is no surprise that CSUAY has an overall A rating, which translates to Strong Buy in our POWR Ratings system.
CSUAY has an A grade for Quality and a B for Value, Momentum, and Stability. In the Coal industry, it is ranked #2.
Beyond what we’ve stated above, we have also given CSUAY grade for Growth and Sentiment. Get all the CSUAY ratings here.
Alpha Metallurgical Resources, Inc. (AMR)
AMR operates as a mining company that engages in the production, processing, and sale of met and thermal coal in Virginia and West Virginia. The company operates active mines and coal preparation and load-out facilities.
In June, AMR announced financial updates, including a voluntary prepayment of $99.40 million on its term loan, which completely paid the loan, a $600 million share repurchase program, and a reduction of $40.10 million in collateral requirements. These financial developments might benefit the company.
For the first quarter ended March 31, AMR’s total revenue increased 177.5% year-over-year to $1.07 billion. Its income from operations rose 2,845.7% from the year-ago value to $453.09 million. The company’s net income increased 1,317.5% year-over-year to $400.89 million, while its net income per share grew 1,246.4% from the prior-year quarter to $20.52.
Street revenue estimate for the fiscal second quarter (ending June 2022) of $1.16 billion indicates an improvement of 194.7% from the prior-year period.
Over the past year, AMR’s stock has gained 450.6% and 111.3% year-to-date to close its last trading session at $129.
AMR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to Strong Buy in our POWR Ratings system.
AMR has an A grade for Growth and a B for Value, Momentum, and Quality. In the Coal industry, it is ranked #3.
Click here to see the additional POWR Ratings for AMR (Stability and Sentiment).
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SXC shares were trading at $6.84 per share on Friday afternoon, up $0.17 (+2.55%). Year-to-date, SXC has gained 5.43%, versus a -17.62% 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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