Coal Comeback Kings: 3 Stocks Destined to Capitalize on the Fuel’s Resurgence
By Josh Enomoto, InvestorPlace Contributor
It’s cynical and risky but hydrocarbon disruptions could boost these coal stocks. · Warrior Met Coal (HCC): Warrior Met Coal’s solid financials is a good place to start the coal journey. · Consol Energy (CEIX): Consol Energy could see robust sales expansion this year. · Ramaco Resources (METC): Earnings and revenue growth projections could lift METC stock.
Source: Shutterstock With the disruptions in the global economy, now may be the time to consider coal stocks. Yes, it’s an awfully anachronistic concept. Further, as InvestorPlace contributor Tyrik Torres pointed out, the Baltimore bridge collapse could have a negative impact on the coal market.
However, it’s also fair to bring up the positives. In particular, China and India have recently lifted imports of seaborne thermal coal to three-month highs. The reason? Strong domestic power demand. And it’s not just foreign nations that require increased energy needs. Stateside, there are rising concerns that soaring power consumption from technologies such as artificial intelligence have created supply pressures.
That may be the most important lesson: technology consumes power and power isn’t free. On that note, below are coal stocks to consider.
One of the top names among coal stocks, Warrior Met Coal (NYSE:HCC) produces and exports non-thermal metallurgical coal for the steel industry. Per its public profile, Warrior Met operates two underground mines located in Alabama. It also sells metallurgical coal to customers located primarily in Europe, South America and Asia. Further, the company sells natural gas, which is extracted as a byproduct of coal production. Although the company is tied to an anachronistic industry, it offers attractive financials. Notably, its three-year revenue growth rate (on a per-share basis) stands at 28.2%, above nearly 86% of its peers. Also, its EBITDA growth rate during the same period clocks in at 93.5%. As well, Warrior Met’s cash-to-debt ratio is 4.31X, better than 83.28% of the competition.
For the current fiscal year, covering experts believe that the company could post revenue of $1.71 billion. It’s not much but it does represent growth of 2%. However, if power demand rises more than expected, it’s quite possible that sales could hit the upper end of the spectrum or $1.77 billion.
CONSOL Energy (CEIX)
Specializing in the field of thermal coal, CONSOL Energy (NYSE:CEIX) together with its subsidiaries, produces and sells bituminous coal in the U.S. and internationally. Per its corporate profile, the company operates through two segments: Pennsylvania Mining Complex (PAMC) and CONSOL Marine Terminal. Primarily, Consol mines, prepares and markets bituminous coal to power generators, industrial end-users and metallurgical end-users.
To be upfront, CEIX presents a highly risky profile. Since the start of the year, CEIX dropped nearly 17%. However, over the past 52 weeks, shares gained over 39% of equity value. What makes Consol an intriguing idea is its solid performance. Outside of a bad miss in the third quarter, the company has consistently beaten its bottom-line targets.
For fiscal 2024, analysts anticipate earnings per share of $12.60, which is below last year’s print of $19.79. Still, on the revenue front, they’re anticipating $2.19 billion. That’s a decent step up (8.6%) from 2023’s result of $2.02 billion. Further, the high-side target goes up to $2.29 billion in sales. CEIX features a moderate buy rating with a $101.50 price target, implying 21% upside potential. Thus, it’s one of the coal stocks to consider.
Ramaco Resources (METC)
Based in Lexington, Kentucky, Ramaco Resources (NASDAQ:METC) engages in the development, operation and sale of metallurgical coal. According to its corporate profile, its development portfolio includes the Elk Creek project which covers an area of approximately 20,200 acres located in southern West Virginia. Also, its Berwind property on the border of Virginia and West Virginia covers approximately 62,500 acres.
As with many other coal stocks, METC presents volatility risks. Since the start of the year, shares slipped almost 12%. However, it must be pointed out that in the past 52 weeks, the company gained over 80% of equity value. Therefore, it’s possible that the red ink could represent a discounted buying opportunity – but only for speculators.
Still, experts see many positives. For fiscal 2024, they’re targeting EPS of $1.86, up conspicuously from last year’s result of $1.78. Moreover, they’re projecting sales of $784.55 million, a big leap from 2023’s haul of $693.52 million.
Also, fiscal 2025 revenue could hit $902.22 million. This is one of the coal stocks to watch closely.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
