ZACKSยท2025-07-17 16:41Industry Overview - The Zacks Coal industry is experiencing significant challenges due to a decline in coal usage in U.S. thermal power plants, with further weakening demand projected for 2025 as coal-fired units are retired and renewable energy sources gain traction [1][4] - Current U.S. estimated recoverable coal reserves stand at approximately 252 billion short tons, with 58% being underground mineable coal, but the industry's prospects are hindered by a shift towards renewable energy and the gradual shutdown of coal-powered generation units [2][4] - The coal industry is ranked 228 out of 245 Zacks industries, placing it in the bottom 7%, indicating a lackluster performance outlook [6][8] Production and Consumption Trends - U.S. coal production is expected to reach 520 million short tons (MMst) in 2025, a slight increase from 512 MMst in 2024, but is projected to decline by 9% to 475 MMst in 2026 due to increased competition from cleaner energy sources [5] - The share of coal in U.S. electricity generation is anticipated to decrease from 17% in 2025 to 15% in 2026, reflecting the ongoing transition to cleaner energy [4] Export and Market Performance - The coal industry is likely to face reduced export volumes in 2025 and 2026, influenced by a strong U.S. dollar and competition from natural gas and renewables [1][3] - Over the past year, coal stocks have underperformed, losing 8.7% compared to a 3.1% decline in the Zacks Oil-Energy sector and an 11.7% gain in the Zacks S&P 500 composite [10] Valuation Metrics - The coal industry is currently trading at a trailing 12-month EV/EBITDA ratio of 5.58X, significantly lower than the Zacks S&P 500 composite's 17.64X, indicating a challenging valuation environment [13] Key Companies - Alliance Resource Partners (ARLP): Expected to produce between 32.75-34.75 million short tons in 2025, with a Zacks Rank 2 (Buy) and a current distribution yield of 10.49% [17][18] - SunCoke Energy (SXC): Plans to produce 4 million tons of domestic coke in 2025, with a focus on metallurgical coal, and holds a Zacks Rank 3 (Hold) with a dividend yield of 5.64% [22][23]