Coal has been a reliable and one of the largest sources of electricity generation. Also, it has been one of the most significant single contributors to carbon dioxide emissions. Although there has been a massive scale-up of clean sources of power generation due to environmental concerns, coal demand is anticipated to remain robust in 2023.
Against this backdrop, let us probe into some coal stocks Yankuang Energy Group Company Limited (YZCAY), Peabody Energy Corporation (BTU), and Alpha Metallurgical Resources, Inc. (AMR) now.
Coal is a nonrenewable fossil fuel that is readily combustible and used to generate electricity. As per IEA, global electricity demand is expected to grow at a much faster pace of 3% per year over the 2023-2025 period compared with the 2022 growth rate on the backs of an increased global population.
Since coal is one of the largest sources of carbon dioxide emissions, countries have pledged to phase out coal production and its use over the coming decades. In addition to the gas shortages, the countries have a long way to achieve such a target with renewable energy sources, and hence, many rely on coal for power and industry.
The demand for hard coal has been growing globally due to its increasing use in the cement, steel, and metal industries. According to a new report published by UnivDatos Markets Insights, the hard coal market is expected to grow at a CAGR of 5% by 2028.
Moreover, coal demand is anticipated to remain resilient in parts of Asia such as China, Indonesia, and India. Moreover, to prepare for increased electricity generation, coal production is projected to surge in the foreseeable future. The global coal market is expected to grow to $658.68 billion in 2027 at a CAGR of 1.4%.
Given this backdrop, coal stocks YZCAY, BTU, and AMR, with notable fundamental strength, could be wise portfolio additions now.
Yankuang Energy Group Company Limited (YZCAY)
Based in Zoucheng, the People’s Republic of China, YZCAY engages in the mining, preparation, and sale of coal worldwide.
YZCAY’s revenue has grown at a 7.3% CAGR over the past five years. Its EBITDA and EBIT have grown at 37.6% and 49.6% CAGRs over the past three years, respectively.
YZCAY’s trailing-12-month levered FCF margin of 14.90% is 148.8% higher than the 5.99% industry average. Its trailing-12-month ROTC of 17.79% is 58.6% higher than the 11.21% industry average.
For the fiscal first quarter that ended March 2023, YZCAY’s total operating revenue stood at RMB44.42 billion ($6.39 billion), up 7.8% year-over-year. Its net profit stood at RMB6.94 billion ($997.77 million). Its earnings per share stood at RMB1.15 for the same quarter.
YZCAY’s net cash flow from operating activities came in at RMB8.62 billion ($1.24 billion) for the period that ended March 31, 2023, compared to RMB1.33 billion ($191.61 million) for the prior-year quarter.
The consensus revenue estimate of $19.02 billion for the year ending December 2024 represents a 5.1% increase year-over-year. For the year ending December 2023, its revenue is expected to come in at $18.09 billion.
The stock has gained 28.7% over the past year and 17.6% over the past six months to close its last trading session at $35.81.
YZCAY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
YZCAY has a B for Value, Stability, and Quality. Within the A-rated 11-stock Coal industry, it is ranked first.
Click here for the POWR Ratings for Growth, Sentiment, and Momentum for YZCAY.
Peabody Energy Corporation (BTU)
BTU engages in the coal mining business internationally. The company operates through four segments: Seaborne Thermal Mining; Seaborne Metallurgical Mining; Powder River Basin Mining; and Other U.S. Thermal Mining. Also, the company provides transportation-related services.
On April 27, BTU announced that its board of directors had declared a quarterly dividend on its common stock of $.075 per share, payable to shareholders on May 31. This reflects the company’s ability to pay back its shareholders.
The board also approved a new share repurchase program authorizing up to $1 billion of BTU common stock repurchases.
BTU President and CEO Jim Grech said, "These actions allow us to return a designated portion of our cash flow to shareholders while reinvesting in our long-term future and maintaining a strong balance sheet, underpinning Peabody's objective to be the coal producer of choice with an unmatched opportunity to return free cash flow to shareholders."
BTU’s revenue has grown at a 10.3% CAGR over the past three years. Its EBITDA has grown at a 50.3% CAGR over the past three years.
BTU’s trailing-12-month levered FCF margin of 21.21% is 254.1% higher than the industry average of 5.99%. Likewise, its trailing-12-month ROCE, ROTC, and ROTA of 63.22%, 32.63%, and 29.05% are 165.9%, 191%, and 233.5% higher than the industry averages of 23.77%, 11.21%, and 8.71%, respectively.
In the fiscal first quarter that ended March 31, 2023, BTU’s revenue grew 97.3% year-over-year to $1.36 billion. The company’s adjusted EBITDA amounted to $390.60 million, up 19.3% year-over-year.
Its net income attributable to common stockholders and net income per share came in at $268.50 million and $1.68 for the fiscal first quarter that ended March 31, 2023, compared to net loss and net loss per share of $119.50 million and $0.88, respectively in the year-ago quarter.
Its net cash provided by operating activities came in at $386.30 million for March 31, 2023, compared to net cash used by operating activities of $273.70 million for March 31, 2022. Furthermore, its cash, cash equivalents, and restricted cash for March 31, 2023, stood at $1.71 billion compared to $848 million for March 31, 2022.
The consensus revenue estimate of $5.16 billion for the fiscal year ending December 2023 represents an increase of 3.7% from the prior-year period. For the same period, Street expects BTU’s EPS to come in at $6.63. The company surpassed the consensus revenue estimates in three of the trailing four quarters.
BTU has gained 5.9% over the past year and marginally intraday to close the last trading session at $22.67.
BTU’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, equating to Buy in our proprietary rating system.
BTU has a grade of A for Quality and Value. Within the same industry, it is ranked #6.
For additional POWR Ratings (Growth, Momentum, Stability, and Sentiment) for BTU, click here.
Alpha Metallurgical Resources, Inc. (AMR)
AMR is a mining company that produces, processes, and sells met and thermal coal in Virginia and West Virginia. The company operates active mines and coal preparation and load-out facilities.
AMR's board of directors authorized a share repurchase program allowing for the expenditure of up to $1.2 billion for the repurchase of the company's common stock. As of May 4, 2023, the company had acquired approximately 4.8 million shares of common stock at approximately $715 million.
On May 3, AMR’s board of directors declared a quarterly dividend payment of $0.50 per share, which increased from the prior quarter's dividend of $0.44 per share, payable to the holders on July 5. This reflects its shareholder return ability.
AMR’s revenue has grown at 30% and 18.9% CAGRs over the past three and five years, respectively. Its EBITDA has grown at a 93.5% CAGR over the past three years.
AMR’s trailing-12-month net income margin of 33.46% is 361.2% higher than the industry average of 7.25%. Likewise, its trailing-12-month ROCE, ROTC, and ROTA of 106.39%, 66.05%, and 56.12% are significantly higher than the industry averages of 10.74%, 6.18%, and 4.80%, respectively.
For the fiscal first quarter that ended March 31, 2023, AMR’s total revenues stood at $911.24 million, while its coal revenues stood at $906.70 million. Its income from operations stood at $314.50 million, while its adjusted EBITDA stood at $354.42 million for the same quarter.
The company’s net income and income per share came in at $270.77 million and $17.01, respectively. AMR’s total current liabilities came in at $316.61 million as of March 31, 2023, compared to $402.63 million as of December 31, 2022.
Analysts expect AMR’s consensus revenue and EPS estimates to come in at $3.35 billion and $51, respectively, for the fiscal year ending December 2023.
Shares of AMR gained 1.6% intraday to close the last trading session at $155.20.
It’s no surprise AMR has an overall rating of B, translating to Buy in our proprietary rating system.
AMR also has an A grade in Quality and a B for Value. It is ranked #5 in the same industry.
Beyond what is stated above, we’ve also rated AMR for Growth, Momentum, Stability, and Sentiment. Get all AMR ratings here.
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YZCAY shares were trading at $34.68 per share on Tuesday morning, down $1.13 (-3.16%). Year-to-date, YZCAY has gained 14.00%, versus a 8.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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