The coal market will continue to grow in the near future, despite increased environmental concerns. This is to meet the increasing energy demand. This backdrop could make quality coal stocks like Yankuang Energy Group Company, Peabody Energy and Alpha Metallurgical Resources (AMR), a good buy. Click here to read ....
The coal has proven to be a reliable source of electricity. It is also one of the largest contributors to CO2 emissions. The demand for coal is expected to remain strong in 2023, despite the massive increase of clean power sources due to environmental concerns.
Let's now examine some coal stocks Yankuang Energy Group Company Limited, Peabody Energy Corporation, and Alpha Metallurgical Resources, Inc.
Coal is an easily combustible fossil fuel used to produce electricity. According to the IEA the global electricity demand will grow at a faster rate of 3% annually over the period 2023-2025 compared to the growth rate of 2022 on the back of an increasing global population.
In the next few decades, many countries will phase out the production of coal and the use of coal. This is because coal is a major source of carbon dioxide. The countries are also facing gas shortages and have a lot of work to do to reach their renewable energy targets. Many rely on coal to power industry and generate electricity.
Globally, the demand for hard coal is increasing due to its increased use in cement, steel and metal industries. A new report by UnivDatos Markets Insights predicts that the hard coal market will grow at a CAGR 5% by 2028.
In addition, it is expected that coal demand will remain strong in Asia, particularly in China, Indonesia and India. In the near future, coal production will increase to meet increased electricity needs. Global coal sales are expected to reach $658.68 Billion in 2027, with a CAGR 1.4%.
With this in mind, the coal stocks YZCAY BTU and AMR with their notable fundamental strength could be a wise addition to your portfolio now.
Yankuang Energy Group Company Limited YZCAY
YZCAY is a coal mining company based in Zoucheng in the People's Republic of China.
YZCAY has seen its revenue grow at a CAGR of 7.3% over the last five years. Over the last three years, its EBITDA and EBIT grew at CAGRs of 37.6% and 48.6%.
YZCAY’s levered FCF Margin of 14.90% for the trailing 12-month period is 148.8% greater than the industry average of 5.99%. The ROTC for the trailing 12 months of 17.79% was 58.6% more than the industry average.
YZCAY reported a total operating revenue of RMB44.42 ($6.39 billion) for the first fiscal quarter ending March 2023. This represents an increase of 7.8% over the previous year. Net profit was RMB 6.94 billion (997.77 millions). The company's earnings per share was RMB1.15 in the same quarter.
YZCAY’s net cash flow (net cash flow) from operating activities was RMB8.62bn ($1.24bn) for the quarter that ended on March 31, 2023. This compares to RMB1.33bn ($191.61m) in the previous year’s quarter.
The consensus estimate of $19.02 Billion for the year ending in December 2024 represents an increase of 5.1% year-over year. The revenue for the year ending in December 2023 is expected to be $18.09 billion.
The stock closed its last trading session on $35.81, up 28.7% in the past year and 17.6% in the past six-month period.
YZCAY POWR Ratings are a reflection of this positive outlook. Our proprietary rating system gives the stock an overall rating B. This is equivalent to a Buy rating. The POWR ratings assess stocks based on 118 factors, each of which has its own weighting.
YZCAY is rated B for Value Stability and Quality. It is the top-ranked company in the 11-stock Coal sector with an A rating.
Peabody Energy Corporation
BTU is engaged in coal mining internationally. The company is divided into four segments: Powder River Basin Mining, Seaborne Thermal Mining, Seaborne Metallurgical Mining and Other U.S. Thermal Mining. Also, the company provides transportation-related services.
BTU announced on April 27 that its board had declared a dividend of $.075 a share on its common stock, payable on May 31. This shows the company's capability to repay its shareholders.
The board approved a new program for the repurchase of BTU common stocks up to $1 billion.
BTU's President and CEO Jim Grech stated, "These actions enable us to return a specific portion of our free cash flow back to our shareholders, while reinvesting into our long-term financial future, and maintaining a solid balance sheet. This supports Peabody’s goal to become the coal producer with unmatched opportunities to return free cash to shareholders."
BTU's revenues have grown at a CAGR of 10.3% over the last three years. Over the last three years, its EBITDA has increased at a CAGR of 50.3%.
BTU's levered FCF Margin of 21.21% for the trailing-12 months is 254.1% greater than the industry average margin of 5.99%. The trailing 12-month ROCE (63.22%), ROTC (32.63%) and ROTA (29.05%), are respectively 165.9% (191%), 233.5%, and 234.7% higher than industry averages (23.77%, 11.121%), and 8.71%.
BTU's revenues grew by 97.3% in the first quarter of fiscal 2023 (ending March 31st) to $1.36billion. The company's EBITDA adjusted grew 19.3% to $390.60 millions.
The net income attributable common stockholders was $268.50 millions and the net income per share was $1.68 in the first fiscal quarter ending March 31, 2023. This compares to a net loss of $119.50 and a net loss per share $0.88 in the previous quarter.
Net cash generated by operations was $386.30 for March 31 2023 compared to $273.70 for March 31 2022. Cash, cash equivalents and restricted cash were $1.71 billion for March 31 2023 compared to $848 millions for March 31 2022.
The consensus estimate of $5.16billion for the fiscal period ending December 2023 is an increase of 3.7% over the previous year. Street estimates BTU's earnings per share to be $6.63 for the same period. In three of the last four quarters, the company has exceeded the consensus revenue estimate.
BTU gained marginally intraday and 5.9% in the past year to close last trading session $22.67.
The POWR ratings of BTU reflect its strong fundamentals. Our proprietary rating system gives the stock a grade of B. This is equivalent to a Buy.
BTU is rated A+ for Value and Quality. It is ranked 6th in the same industry.
Click here to view additional POWR ratings (Growth Momentum Stability and Sentiment Ratings) for BTU.
Alpha Metallurgical Resources, Inc.
AMR is an AMR is a mining firm that processes and sells thermal and met coal in Virginia and West Virginia. The company has active mines, coal preparation and loading facilities.
AMR's Board of Directors authorized an share repurchase programme that allowed for a maximum expenditure of $1.2 billion to repurchase the company's stock. By May 4, 2023 the company owned approximately 4.8 millions shares of common stock valued at $715 million.
AMR's Board of Directors declared on May 3 a quarterly dividend payment at $0.50 per share. This is an increase from the $0.44 dividend per share paid to holders in the previous quarter. The dividend will be payable to shareholders on July 5, 2009. This is a reflection of its ability to return value to shareholders.
AMR's revenues have grown at CAGRs of 30% and 18.9% over the last three and five year periods, respectively. Over the last three years, its EBITDA has increased at a CAGR of 93.5%.
AMR's net income margin for the trailing 12 months is 33.46%, which is 361.2% more than the average industry figure of 7.25%. AMR's trailing-12 month ROCE, ROTC and ROTA are also significantly higher than industry averages, which are 10.74%, 6.82% and 4.80% respectively.
AMR's total revenue for the first quarter of fiscal 2023 that ends March 31st, 2023 was $911.24 millions, and its coal revenue was $906.70 millions. For the same quarter, its income from operations was $314.50 millions and adjusted EBITDA was $354.42million.
Net income for the company was $270.77 millions and earnings per share were $17.01 respectively. AMR's current liabilities totaled $316.61 millions as of March 31 2023, down from $402.63 as of December 31 2022.
Analysts expect AMR to have revenue and EPS estimates of $3.35 billion for the fiscal year that ends December 2023.
AMR shares closed the last trading day at $155.20, up 1.6% from yesterday.
Our proprietary rating system gives AMR a B- rating, which translates to "Buy".
AMR has also been given an A for Quality and a grade B for Value. It is ranked as #5 in its industry.
In addition to the above ratings, we have also given AMR ratings for Growth, Momentum Stability and Sentiment. All AMR ratings are available here.
Our proprietary model reveals 10 stocks with a high downside potential. Make sure you don't have any of these "death trap" stocks in your portfolio.
YZCAY's shares traded at $34.68 on Tuesday morning. This is down $1.13. (-3.16%). YZCAY shares have gained 14.00% year-to-date compared to the benchmark S&P 500 index which has risen by 8.06%.
Sristi Suman Jaswal is the author.
Sristi became interested in the stock market during her school years, and she went on to become a journalist. Her preferred strategy is to invest in stocks that are undervalued and have solid growth prospects over the long term.