Coal prices in the United States hit record highs last year, driven by increased demand for the dirty fuel rise during winters. The price of coal mined from Central Appalachia, which is a benchmark for the eastern U.S. thermal coal market, hit 12-year highs in November last year. Coal prices, on average, have doubled in 2021. Moreover, the temporary export ban announced by Indonesia, the biggest coal exporter in the world, earlier this month has caused coal prices to rally. The upward pressure on coal prices will likely continue until such a ban is removed.
The International Energy Administration (IEA) expects coal demand to hit all-time highs in 2022 as the global economy recovers from the pandemic-fuelled disruptions. Moreover, IEA is predicting that the coal demand will likely remain at the all-time high level until at least 2024.
Given the backdrop, here are the top Coal Stocks that are well-positioned to capitalize on the growing demand: Warrior Met Coal, Inc. (HCC), Ramaco Resources, Inc. (METC), and Hallador Energy Company (HNRG).
Warrior Met Coal, Inc. (HCC)
HCC produces and exports metallurgical coal for the global steel industry mined from the two underground mines located in Alabama. The company sells premium met coal, also known as hard coking coal and natural gas, extracted as a byproduct of coal production.
Last November, HCC priced its senior secured notes offering. The company is expected to raise $350 million in gross proceeds through this offering. It plans to utilize the funds to redeem its existing notes due 2024. This is expected to reduce HCC’s interest repayment burden significantly.
HCC’s net revenues increased 12.4% year-over-year to $202.47 million in the fiscal third quarter ended September 30, 2021. HCC’s adjusted EBITDA grew 524.6% year-over-year to $104.94 million. Its adjusted net income improved 253.1% year-over-year to $50.10 million. The company’s adjusted EPS increased 446.4% from the year-ago value to $0.97. It reported an earnings surprise of 73.21%.
The consensus revenue estimate of $1.24 billion for fiscal 2022 represents a 30.7% year-over-year growth from the same period last year. The consensus EPS estimate of $6.28 for fiscal 2022 indicates a 72.1% year-over-year growth from the last year. The company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters.
Over the past year, the stock has gained 23.5% to close yesterday’s trading session at $28.43.
HCC’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
HCC has a grade of A for Momentum and a B for Growth and Quality. Within the B-rated Coal industry, it is ranked #4 of 11 stocks. To see additional POWR Ratings (Value, Stability, and Sentiment) for HCC, click here.
Ramaco Resources, Inc. (METC)
METC is a metallurgical coal company that operates and develops coal in southern West Virginia, southwestern Virginia, and southwestern Pennsylvania. The company owns and mines four properties: RAM Mine, Elk Creek, Berwind, and Knox Creek.
Last month, METC acquired $30 million worth of Amonate Assets from Coronado Global Resources Inc. The Amonate Assets comprise a mine complex located in McDowell County, West Virginia, and Tazewell County, Virginia. This asset acquisition is expected to boost METC’s production capacities by 200,000 tons in 2022.
In October 2021, METC completed its 2022 sales negotiations with North American steel customers. METC has contracted to sell 1.7 million tons of coal and generate revenues and adjusted EBITDA of more than $325 million and $190 million, respectively, in 2022.
In the fiscal 2021 third quarter ended September 30, METC’s revenues increased 93.6% year-over-year to $76.38 million. Adjusted EBITDA rose 2698% from the same period last year to a record $17.8 million. Net income increased 247.3% from the year-ago value to $7.04 million. The company’s EPS increased 245.5% from the year-ago value to $0.16.
Analysts expect METC’s revenue for fiscal 2022 to come in at $561.53 million, representing a 98.6% rise year-over-year. Street expects the company’s EPS for fiscal 2022 to come in at $5.18, representing a 451.1% increase year-over-year.
Shares of METC gained 338.5% over the past year and 16.7% over the past month.
METC has a grade of A for Momentum and B for Growth. It is r ranked #5 of 11 stocks in the Coal industry. Click here to see METC’s ratings for Value, Quality, Stability, and Sentiment.
Hallador Energy Company (HNRG)
HNRG is an energy sourcing company that focuses on coal mining in the state of Illinois and services the electric power generation industry. It is involved in gas exploration activities in Indiana through Sunrise Energy, LLC. The company’s business consists of Hallador Renewables, Sunrise Coal, Sunrise Energy, and Logistics.
In June 2021, HNRG partnered with Hoosier Energy Rural Electric Cooperative, Inc. to develop up to 1000 megawatts (MW) of renewable power near the Merom Coal Generation Station in Sullivan, IN. This initiative is expected to result in the company’s evolution and expansion of its portfolio to include renewable energy.
In the fiscal 2021 third quarter ended September 30, 2021, HNRG’s total revenues increased 22.3% year-over-year to $79.82 million. Net income came in at $7.99 million, up 315.3% from the same period last year. HNRG’s income before income taxes rose 353.3% from the prior-year quarter to $6.63 million. The company’s adjusted EBITDA rose 20.1% from the year-ago value to $20.52 million. In addition, the company’s net income per share increased 333.3% from the year-ago value to $0.26.
HNRG’s revenues are expected to improve 1.5% year-over-year to $248.90 million in fiscal 2021. Analysts expect HNRG’s EPS for fiscal 2021 to come in at $0.11, representing a 155% rise year-over-year.
HNRG gained 81.2% over the past year to close yesterday’s trading session at $2.68.
HNRG has an overall rating of B, which translates to Buy in our proprietary rating system. The stock has an A grade for Value, Momentum, and Sentiment and a B grade for Quality. It is ranked #3 of 11 stocks in the same industry. Click here to see the additional POWR Ratings for Growth and Stability for HNRG.
HCC shares were trading at $28.90 per share on Wednesday afternoon, up $0.47 (+1.65%). Year-to-date, HCC has gained 12.41%, versus a -4.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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