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Analysts expect higher earnings for US coal companies in Q4'22


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Analysts expect higher earnings for US coal companies in Q4'22

Analysts expect most U.S. coal companies to report higher earnings per share for the fourth quarter of 2022 compared to the prior-year period.

Analysts' consensus estimates project that five of the eight publicly traded U.S. coal companies analyzed by S&P Global Market Intelligence will report higher fourth-quarter EPS year over year. In addition, analysts expect each U.S. coal company to report positive revenue as producers of coal used for both steelmaking and power generation have taken advantage of a period of elevated prices that lasted through much of the year.

Strong results expected for Q4'22

Every U.S. coal miner analyzed is expected to generate more revenue in the fourth quarter of 2022 compared to the same period of 2021, analysts estimated. Most companies are also expected to report higher EPS in the fourth quarter than in the third quarter of 2022. However, some of the tailwinds that boosted the industry in 2022 are slowing.

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"Current natural gas prices imply limited upside for domestic coal and electricity prices, making positive earnings revisions there unlikely, in our opinion," Lucas Pipes, a B. Riley Securities analyst, wrote in a Jan. 17 note. "[W]e would take advantage of the lower entry point for many of our met coal-exposed stocks while limiting exposure to the reversal in domestic energy markets."

Metallurgical coal producers Alpha Metallurgical Resources Inc. and Arch Resources Inc. are expected to lead the pack among coal miners on an EPS basis, with analysts' consensus estimates projecting fourth-quarter earnings of $17.70 and $12.46 per share, respectively.

"We believe that the lack of meaningful met coal supply growth continues to underpin the investment case for met coal equities," Pipes wrote.

Just two of the U.S. coal companies analyzed, metallurgical coal producer Ramaco Resources Inc. and steam coal producer Hallador Energy Co., are expected to report less than $1 in EPS for the fourth quarter of 2022.

Share prices outpace the market

Most publicly traded U.S. coal companies have been outpacing the S&P 500 stock index throughout 2022.

Hallador Energy's stock price swelled by nearly 300% from the start of 2022 to Jan. 17. Consol Energy Inc., Peabody Energy Corp. and Alpha Metallurgical Resources also saw steady increases in equity value throughout the year.

On the other hand, Ramaco Resources and Warrior Met Coal Inc. were the only producers analyzed that did not outperform the broader market by a large margin in 2022.

The U.S. Energy Information Administration expects the share of U.S. coal-generated electricity to fall from 20% in 2022 to 18% in 2023 as renewable generation rises. As a result, the EIA projects U.S. coal production will fall by 11% to 530 million tons in 2023 before dropping a further 6% to 500 million tons in 2024.

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