Peabody-4 Coal Stocks to Watch Despite Ongoing Industry Headwinds

Coal Industry Overview - The Zacks Coal industry comprises companies involved in the discovery and mining of coal, which is used worldwide for electricity generation, steel, and cement production [2] - The U S has an estimated 252 billion short tons of recoverable coal reserves, with 58% being underground mineable coal [2] - Five U S states contribute 70% of annual coal production and 60% of surface mining production [2] - Coal demand is declining due to increased renewable energy usage and the gradual shutdown of coal-powered generation units [2] Industry Trends - U S coal production is projected to decline by 13 1% in 2024 and 5 2% in 2025, reaching 485 million short tons [3] - Coal prices are expected to decrease by 1 6% in 2024 and 2 1% in 2025, reaching $2 43 per million British thermal units [3] - U S coal exports are projected to drop by 2 4% in 2025 after a 5 1% increase in 2024 [3] - Global steel demand is forecasted to drop by 0 9% in 2024 but increase by 1 2% in 2025, impacting coal exports [3] Emission Policies and Reliability - Coal remains a reliable energy source for 24x7 electricity production, but emission concerns are reducing its usage [4] - The U S aims for 100% carbon pollution-free electricity by 2030 and net-zero emissions by 2050, leading to reduced coal usage [4] - Coal's share in U S electricity generation is expected to drop from 17% in 2023 to 16% in 2024 and 2025 [4] - 12 GW of coal-fired electricity generating capacity is set to retire, with coal-fired units becoming backup options [4] Interest Rate Impact - The U S Federal Reserve lowered the benchmark rate by 50 basis points to 4 75%-5%, benefiting capital-intensive coal companies [5] - Lower interest rates support coal operators planning infrastructure upgrades and expansions [5] Industry Performance and Valuation - The Zacks Coal industry has outperformed the Zacks Oil and Gas sector and S&P 500, gaining 37 9% over the past year [10] - The industry is trading at a trailing 12-month EV/EBITDA of 5 55X, compared to the S&P 500's 17 77X and the sector's 3 41X [11] - The industry's earnings estimates for 2024 have declined by 6 2% since November 2024, reflecting reduced confidence in growth potential [8] Key Coal Stocks - **CONSOL Energy (CEIX)**: Produces and exports thermal and metallurgical coal, with 2025 earnings and revenue expected to rise by 31 8% and 112 1%, respectively [14][15] - **Peabody Energy (BTU)**: Engages in thermal and metallurgical coal mining, with 2024 and 2025 earnings per share estimates increasing by 1 3% and 3 7%, respectively [15][16] - **Warrior Met Coal (HCC)**: Produces metallurgical coal for the steel industry, with a 62 1% stock gain over the past year and plans to invest$ 435-$500 million in 2024 [18][19] - SunCoke Energy (SXC): Focuses on coke making and logistics, with a 38 3% year-over-year increase in 2024 earnings per share and a 4 36% dividend yield [20][21]