The use of coal is resurgent in the United States after a pandemic-driven decline. U.S. power plants are set to ignite 23% more coal this year, marking the first increase since 2013. Coal is expected to generate 24% of electricity in the country this year. Furthermore, the spot coal prices in the central Appalachia, a benchmark for the Eastern US thermal coal market, rose more than $10 last week to $89.75, its highest increase in more than 12 years.
According to the U.S. Energy Information Administration, U.S. coal-fired generation in 2021 is expected to be 22% more than in 2020, mainly because of elevated natural gas prices. However, coal supplies are tight because production was halted for several months, and coal mines operated at reduced capacity, during the worst of the pandemic. And because output is unlikely to match the growing demand, prices should keep soaring.
SunCoke Energy, Inc. (SXC)
SXC is an independent producer of coke that operates in the United States and Brazil. The Lisle, Ill., company offers metallurgical and thermal coal functions through the broad segments of Domestic Coke; Brazil Coke; and Logistics.
On November 1, SXC declared a $0.06 dividend per share of the company’s common stock, payable to shareholders on December 1. This reflects upon SXC’s solid cash balance and ability to pay back shareholders.
In September, the company reported restoring electrical power at its Convent Marine Terminal and returning to normal operations. The resumption of activities at the location should improve the company’s operational capability.
For its third fiscal quarter, ended September 30, SXC’s sales and other operating revenue increased 21.3% year-over-year to $366.50 million. Its operating income rose 245% from the prior-year quarter to $41.40 million. Its net income attributable to SXC and EPS came in at $23 million and $0.27, respectively, up substantially from their negative year-ago values.
The $0.22 consensus EPS estimate for the current quarter (ending December 2021) indicates a 344.4% year-over-year increase. Likewise, the $472.20 million consensus revenue estimate for the current quarter reflects a 52.3% improvement from the prior-year quarter. Furthermore, SXC has an impressive surprise earnings history; it has topped consensus EPS estimates in three out of the trailing four quarters.
The stock has gained 41.5% in price over the past year but declined 7.3% over the last five days to close yesterday’s trading session at $6.27. It is currently trading 23.1% below its 52-week high of $8.15.
SXC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
SXC has a Growth and Momentum grade of A, and a Value, Sentiment, and Quality grade of B. In the 11-stock Coal industry, it is ranked #1. The industry is rated A.
Click here to see the additional POWR Ratings for SXC (Stability).
Ramaco Resources, Inc. (METC)
METC in Lexington, Ky., is a metallurgical coal producer and seller. The 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, which 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 distribution, 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. 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). The Street expects revenue to increase 69.7% from the prior-year quarter to $86.78 million.
The stock has gained 241% in price over the past year to close yesterday’s trading session at $11.15. However, it has declined 14.4% over the past five days. METC is currently trading 44.2% 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.
Want More Great Investing Ideas?
SXC shares were trading at $6.12 per share on Friday afternoon, down $0.15 (-2.39%). Year-to-date, SXC has gained 45.69%, versus a 27.04% 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...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|SXC||Get Rating||Get Rating||Get Rating|
|METC||Get Rating||Get Rating||Get Rating|