Despite the rising focus on nonrenewable energy substitutes, there has been an escalating demand for coal due to its affordability. Moreover, growing plant capacities have solidified the sector’s growth prospects.
Given this backdrop, investors could consider buying fundamentally strong coal stocks such as CONSOL Energy Inc. (CEIX), China Coal Energy Company Limited (CCOZY), SunCoke Energy, Inc. (SXC), and China Shenhua Energy Company Limited (CSUAY), given their solid momentum.
Several countries have embarked on extensive climate change strategies to reduce coal consumption in the coming years. However, the ongoing power shortages and the slow growth, in addition to renewable energy capacities, make coal vital for power generation and industrial usage in several countries.
Worldwide electricity generation from coal hit record highs, and thermal coal exports surpassed 1 billion metric tons for the first time last year. Meanwhile, global operating coal capacity grew by 2% in 2023, with China driving two-thirds of new additions. China saw new plants amounting to 47.4 GW come online last year.
The ongoing measures to reduce dependence on fossil fuels are expected to bring a steady and drawn-out decline in coal consumption in the foreseeable future. However, this transition has been slow due to ever-rising power demand and cost overruns in renewable energy projects.
To comply with the ongoing measures and strategies to reduce greenhouse gases, carbon capture, and storage technology methods are being adopted to reduce emissions, thus helping keep coal in demand beyond 2030. The global coal mining market is anticipated to reach $795.76 billion by 2032, growing at a 2.6% CAGR.
Considering these conducive trends, let’s examine the fundamentals of the four featured Coal stocks, beginning with the fourth choice.
Stock #4: CONSOL Energy Inc. (CEIX)
CEIX produces and sells bituminous coal in the U.S. and internationally. It operates through two segments: Pennsylvania Mining Complex (PAMC), and CONSOL Marine Terminal.
CEIX’s trailing-12-month Return on Total Assets of 19.68% is 244.5% higher than the industry average of 5.71%. Likewise, its trailing-12-month net income margin and levered FCF margin of 21.96% and 17.44% are 93.7% and 187.1% higher than the industry averages of 11.33% and 6.08%, respectively.
CEIX’s total revenue and other income for the fiscal first quarter that ended March 31, 2024, stood at $565.04 million. Its adjusted EBITDA came in at $181.75 million. Moreover, its net income amounted to $101.89 million. Also, its earnings per share came to $3.39.
Analysts expect CEIX’s revenue for fiscal 2025 to increase 2.9% year-over-year to $2.19 billion. Its EPS for the quarter ending September 30, 2024, is expected to rise 10.2% year-over-year to $3.45. The company surpassed the Street revenue and EPS estimates in three of the trailing four quarters, which is impressive. Over the past year, the stock has gained 71.5% to close the last trading session at $98.01.
The stock is trading above its 50-day and 100-day moving averages of $86.08 and $87.90, respectively.
CEIX’s POWR Ratings reflect its positive prospects. It has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
CEIX has an A grade for Momentum and Quality and a B for Value. Within the B-rated Coal industry, it is ranked #5 out of 13 stocks. Click here for the additional POWR Ratings of CEIX (Growth, Stability, and Sentiment).
Stock #3: China Coal Energy Company Limited (CCOZY)
Headquartered in Beijing, the People's Republic of China, CCOZY engages in the coal production and trading and coal chemical businesses in the People's Republic of China and internationally.
CCOZY’s trailing-12-month asset turnover ratio of 0.51x is 1.6% higher than the industry average of 0.50x. Similarly, its trailing-12-month levered FCF margin of 8.24% is 35.7% higher than the industry average of 6.08%.
For the fiscal first quarter that ended March 31, 2024, CCOZY’s operational revenue stood at RMB45.39 billion ($6.26 billion). For the same quarter, its net profit attributable to shareholders of the listed company and earnings per share came to RMB4.97 billion ($685.75 million) and RMB0.37, respectively.
As of March 31, 2024, CCOZY’s total assets amounted to RMB351.79 billion ($48.54 billion), compared to RMB349.36 billion ($48.21 billion) as of December 31, 2023.
Street expects CCOZY’s revenue for fiscal 2024 to increase 1.7% year-over-year to $27.26 billion. Over the past six months, the stock has gained 40.9%, closing the last trading session at $21.44.
The stock is trading above its 50-day and 100-day moving averages of $20.85 and $18.62, respectively.
CCOZY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to Buy in our proprietary rating system.
It has an A grade for Value and Momentum and a B for Stability. It is ranked #3 in the same industry. Get CCOZY’s Growth, Sentiment, and Quality ratings here.
Stock #2: SunCoke Energy, Inc. (SXC)
SXC operates as an independent producer of coke in the Americas and Brazil. The company operates through three segments: Domestic Coke, Brazil Coke, and Logistics.
SXC’s trailing-12-month asset turnover ratio of 1.24x is 81.9% higher than the industry average of 0.68x. Its trailing-12-month Return on Common Equity and Return on Total Capital of 10.06% and 6.93% are 72.4% and 44.5% higher than the industry averages of 5.84% and 4.80%, respectively.
SXC’s revenues for the first quarter that ended March 31, 2024, stood at $488.40 million, up marginally year-over-year. Its operating income grew 8.8% over the prior-year quarter to $34.50 million. In addition, its net income attributable to SXC and earnings attributable to SXC per common share increased 22.7% and 21.1% from the year-ago quarter to $20 million and $0.23, respectively.
For the quarter ending September 30, 2024, SXC’s EPS is expected to increase 162.5% year-over-year to $0.21. It surpassed consensus revenue estimates in each of the trailing four quarters. The stock has gained 46.3% over the past year to close the last trading session at $10.52.
The stock is trading above its 200-day moving average of $10.12.
SXC’s POWR Ratings reflect this promising outlook. It has an overall rating of B, equating to Buy in our proprietary rating system.
SXC has an A grade for Momentum and a B for Value. It is ranked #2 in the Coal industry. Click here to see the additional POWR Ratings of SXC for Growth, Stability, Sentiment, and Quality.
Stock #1: China Shenhua Energy Company Limited (CSUAY)
Headquartered in Beijing, the People's Republic of China, CSUAY produces and sells coal and power, railway, port, and shipping transportation, and coal-to-olefins businesses in the People's Republic of China and internationally. It operates through six segments: Coal, Power Generation, Railway, Port, Shipping, and Coal Chemical.
On May 28, 2024, CSUAY unveiled its first domestic intelligent heavy-haul electric locomotive, developed in partnership with Shuohuang Railway and CRRC Zhuzhou Locomotive Co., Ltd. This milestone in Zhuzhou City marks a significant technological breakthrough, transforming traditional heavy-haul locomotives into smart machines.
CSUAY’s trailing-12-month Return on Total Capital of 10.22% is 31.9% higher than the industry average of 7.75%. Likewise, its trailing-12-month EBIT margin and levered FCF margin of 25.68% and 11.78% are 34.4% and 93.8% higher than the industry averages of 19.10% and 6.08%, respectively.
For the fiscal first quarter that ended March 31, 2024, CSUAY’s revenue increased marginally year-over-year to RMB87.65 billion ($12.09 billion). The company’s gross profit stood at RMB27.18 billion ($3.75 billion). Its profit for the period attributable to equity holders of the company amounted to RMB17.76 billion ($2.45 billion). Furthermore, its earnings per share came in at RMB0.89.
Analysts expect CSUAY’s revenue for the quarter ending September 30, 2024, to increase 1.3% year-over-year to $11.50 billion. CSUAY’s stock has gained 66.9% over the past nine months to close the last trading session at $19.23.
The stock is trading above its 100-day and 200-day moving averages of $15.96 and $14.20, respectively.
CSUAY’s robust prospects are reflected in its POWR Ratings. It has an overall A rating, equating to a Strong Buy in our proprietary rating system.
CSUAY has an A grade for Momentum and a B for Stability and Quality. It is ranked first in the same industry. Beyond what we stated above, we have also rated CSUAY for Growth, Value, and Sentiment. Get all the CSUAY ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
CSUAY shares were trading at $19.42 per share on Wednesday morning, up $0.20 (+1.01%). Year-to-date, CSUAY has gained 41.96%, versus a 11.05% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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