Numerous countries have initiated long-term climate strategies, aiming to phase out coal in the coming decades. However, due to gas shortages and the slow expansion of renewable energy capacity, coal remains a crucial energy source for power generation and industrial needs in several regions.
Considering the prolonged dependence on coal, it could be wise to monitor resilient coal stocks CONSOL Energy Inc. (CEIX), Hallador Energy Company (HNRG), China Shenhua Energy Company Limited (CSUAY), and SunCoke Energy, Inc. (SXC) for potential gains. Let’s understand this in detail.
While coal has endured as a dependable electricity source, it remains the foremost producer of carbon dioxide emissions. Consequently, the ongoing efforts of leading global powers to replace coal with renewable energy sources are expected to lead to a gradual, protracted reduction in coal consumption over an extended period.
Nonetheless, the transition is perceived as exceptionally sluggish. Despite the resounding climate commitments made by numerous major global players, it appears that breaking their coal dependency remains a formidable challenge, with consumption poised to reach an unprecedented peak once more.
Just a few months ago, an International Energy Agency (IEA) report indicated that coal consumption is projected to reach a historic zenith and persist at this level from 2022 to 2025 unless the shift towards cleaner alternatives accelerates significantly.
Moreover, according to the IEA, global investment in coal production and supply is set to rise by about 10% in 2023, exceeding the $135 billion spent in 2022. Almost 90% of this investment is expected in the Asia Pacific region, notably in China and India, as both countries aim to expand production and develop new coal mines.
As per a Research and Markets report, the global coal market expanded from $614.96 billion in 2022 to $621.89 billion in 2023, achieving a CAGR of 1.1%. Projections indicate that the coal market is poised to reach $658.68 billion by 2027, with a CAGR of 1.4%.
In light of these encouraging trends, let's look at the fundamentals of the four leading Coal stocks, beginning with number 4.
Stock #4: CONSOL Energy Inc. (CEIX)
CEIX produces and exports bituminous coal. Its Pennsylvania Mining Complex segment mines, prepares, and markets this coal to power generators, and industrial and metallurgical end-users. Meanwhile, the CONSOL Marine Terminal segment offers coal export terminal services via the Port of Baltimore.
CEIX’s trailing-12-month EBITDA margin of 46.12% is 16.3% higher than the industry average of 39.65%. Its trailing-12-month net income margin of 29.91% is 108.5% higher than the 14.35% industry average. Also, the stock’s levered FCF margin of 18.39% is 182.2% higher than the industry average of 6.52%.
For the second quarter that ended June 30, 2023, CEIX’s revenue and other income increased 21.4% year-over-year to $660.97 million. Its earnings before income tax rose 37.3% from the year-ago value to $205.30 million.
In addition, the company’s net income and EPS grew 32.8% and 39.5% from the prior year’s quarter to $167.72 million and $4.94, respectively.
The consensus revenue estimate of $2.53 billion for the fiscal year ending December 2023 reflects a 20.6% year-over-year growth. Likewise, analysts expect the company’s EPS to come in at $21.43, up 77.4% year-over-year. CEIX’s shares have gained 71.3% over the past six months to close the last trading session at $95.09.
CEIX’s positive fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
CEIX has an A grade for Quality. It has ranked #4 in the 11-stock A-rated Coal industry.
In addition to the POWR Ratings I’ve just highlighted, you can see CEIX’s ratings for Growth, Sentiment, Value, Momentum, and Stability here.
Stock #3: Hallador Energy Company (HNRG)
HNRG is involved in producing steam coal tailored for the electric power generation sector. The company owns and operates Oaktown Mine 1, Oaktown Mine 2 (both underground), Freelandville Center Pit (a surface mine in Freelandville), and Prosperity Surface Mine in Petersburg, Indiana.
HNRG’s trailing-12-month levered FCF margin of 18.11% is 177.9% higher than the industry average of 6.52%. Its trailing-12-month ROCE, ROTC, and ROTA of 32.52%, 17.41%, and 11.77% compare to the industry average of 21.57%, 10.60%, and 8.06%, respectively.
For the second quarter that ended June 30, 2023, HNRG’s revenues increased 144.5% year-over-year to $161.19 million. Its adjusted EBITDA grew 206.9% from the year-ago value to $35.30 million. Also, cash inflow from operating activities came in at $18.13 million, compared to a cash outflow of $2.70 million in the prior year’s quarter.
Moreover, the company’s net income stood at $16.92 million, compared to a net loss of $3.39 million in the previous year’s period.
For the fiscal year ending December 2023, analysts expect HNRG’s revenue to increase 99.2% year-over-year to $721 million. Also, the company’s EPS for the ongoing year is expected to increase 235.1% year-over-year to $1.91. The stock has gained 101.4% over the past year, closing the last trading session at $11.56.
HNRG’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
HNRG has an A grade for Growth and a B for Value. It is ranked #3 out of 11 stocks in the Coal industry.
Click here to access the additional HNRG ratings (Stability, Quality, Momentum, and Sentiment).
Stock #2: China Shenhua Energy Company Limited (CSUAY)
Headquartered in Beijing, China, CSUAY is involved in coal and power production and sales, as well as railway, port, and shipping transportation, alongside coal-to-olefins ventures. The company operates through six segments: Coal; Power Generation; Railway; Port; Shipping; and Coal Chemical.
The stock’s trailing-12-month EBIT margin of 28.32% is 16% higher than the industry average of 24.42%. Its trailing-12-month net income margin of 19.31% is 34.6% higher than the 14.35% industry average. Also, the CSUAY’s trailing-12-month cash from operations is $13.47 billion compares to the $655.63 million industry average.
For the six months that ended June 30, 2023, CSUAY’s revenue from goods and services increased 2.3% year-over-year to RMB169.44 billion ($23.27 billion).
As of June 30, 2023, the company’s cash and cash equivalents stood at RMB150.31 billion ($20.65 billion), compared to RMB131.46 billion ($18.06 billion) as of December 31, 2022. Its current assets amounted to RMB240.96 billion ($33.10 billion), compared to RMB211.05 billion ($28.99 billion).
The company’s revenue for the fiscal third quarter ending September 2023 is expected to increase 1.8% year-over-year to $11.93 billion. Over the past month, the stock has gained 5.7%, closing the last trading session at $12.01.
CSUAY’s robust outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
CSUAY has a B grade for Stability and Quality. It is ranked #2 out of 11 stocks within the same industry.
Click here to access additional CSUAY ratings for Value, Growth, Sentiment, and Momentum.
Stock #1: SunCoke Energy, Inc. (SXC)
SXC serves as an autonomous Coke producer in the Americas and Brazil, structured into three segments: Domestic Coke; Brazil Coke; and Logistics. It supplies both metallurgical and thermal coal, in addition to offering handling and mixing services to diverse industrial clients, such as steel, coke, electric utility, and coal-producing sectors.
SXC’s trailing-12-month levered FCF margin of 6.95% is 87.9% higher than the industry average of 3.70%. Its trailing-12-month ROCE, ROTC, and ROTA of 15.66%, 7.54%, and 5.47% are 80.7%, 34.7%, and 36.8% higher than the respective industry averages of 8.48%, 5.60% and 4.00%.
For the second quarter that ended June 30, 2023, SXC’s sales and other operating revenue increased 6.5% year-over-year to $534.40 billion. Its operating income rose 8.7% from the year-ago value to $37.50 million. Also, the company’s adjusted EBITDA grew 3.8% from the prior year’s period to $74 million.
In addition, net income and earnings attributable to SXC stood at $20.40 million and $0.24, up 13.3% and 14.3% year-over-year to $20.40 million and $0.24, respectively.
The consensus EPS estimate of $0.18 for the fiscal fourth quarter ending December 2023 reflects a 25% year-over-year growth. SXC’s shares have gained 40.3% over the past year to close the last trading session at $9.23.
SXC’s positive fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
SXC has a B grade for Sentiment and Value. It has topped the 11-stock Coal industry.
Click here to access the additional SXC ratings (Growth, Stability, Quality, and Momentum).
What To Do Next?
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CSUAY shares were trading at $12.59 per share on Thursday afternoon, up $0.58 (+4.83%). Year-to-date, CSUAY has gained 21.75%, versus a 18.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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