Chicago, IL – April 25, 2025 – Today, Zacks Equity Research discusses SunCoke Energy SXC and Ramaco Resources, Inc. METC.
Industry: Coal
Link: https://www.zacks.com/commentary/2455212/2-coal-stocks-to-watch-amid-the-ongoing-weakness-in-the-industry
The Zacks Coal industry stocks are suffering due to a decline in the use of coal in thermal power plants in the United States. In 2025, the demand for coal will be adversely impacted by the planned retirement of coal units and the utilization of more renewable sources for electricity generation.
The ongoing energy transition, with utility operators steadily phasing out coal units, continues to hit the coal industry. Hence, the coal production volume is coming down. Coal export volumes in 2025 and 2026 are expected to drop due to a strong dollar. Despite a drop in coal production, SunCoke Energy and Ramaco Resources, Inc., with high-quality met coal production volumes, are expected to gain during this difficult phase.
The Zacks Coal industry comprises companies involved in the discovery and mining of coal. Coal is mined through the open-cast or the underground method. The commodity is valued for its energy content and used worldwide to generate electricity and manufacture steel and cement. Per the U.S. Energy Information Administration (“EIA”) report, the current U.S. estimated recoverable coal reserves are about 252 billion short tons, of which about 58% is underground mineable coal.
Given the current production rates, coal resources are likely to last many years. Five states in the United States contribute 70% of the yearly coal production and 60% of the coal production from surface mining. Per the EIA, the demand for coal will decline due to the usage of more renewable assets and a gradual shutdown of coal-powered generation units, hurting the prospects of the coal industry.
Coal Industry to Experience Softness in Exports: Despite an expected drop in coal production volumes, coal operators in the United States benefited from the stable coal export volumes. However, the EIA now projects total coal exports from the United States will be 93 million short tons (MMst), down 4.1% from the export volumes projected in March 2025.
The drop in export volumes was due to the imposition of reciprocal tariffs on U.S. coal exports by China. The thermal coal export volumes are expected to drop to 47 MMst in 2026 from 49 MMst in 2025. Per the World Steel Association report, first-quarter steel production volumes were lower year-over-year. The imposition of tariffs by the U.S. administration can further reduce the demand for steel and lower the demand for met coal.
Despite Reliability, Emission Policy to Hurt Coal Industry: Coal is still a reliable source of energy and ensures 24/7 electricity production from the generation units. Yet, increasing emission concerns are resulting in reduced usage of coal in electricity generation. The United States’ Sustainability Plan includes an aim toward transitioning to 100% carbon pollution-free electricity by 2030 and achieving net-zero emissions by 2050.
The growing use of natural gas and renewable energy sources, such as solar and wind, has greatly reduced the demand for coal. Natural gas has become increasingly cost-effective, largely due to advancements in fracking technology, while renewables have gained competitiveness through declining production costs and supportive government policies.
Per the EIA, the share of coal in U.S. electricity generation will drop from 16% in 2025 to 15% in 2026. Unless utility operators invest heavily in pollution-control measures to reduce emissions from power plants, domestic coal usage will continue to drop. Coal-fired units are gradually becoming backup units for utility operators in case of emergency power requirements.
U.S. Coal Production: Per EIA’s projection, coal production in the United States is expected to be 490 million short tons (MMst) in 2025, up from the previous projection of 480 MMst made in March 2025. The increase was due to higher production volumes in the Appalachia region and higher gas prices. Per the EIA, coal production is expected to drop 4.5% year over year in 2025 and further drop 4.7% year over year in 2026. The coal operators continue to fight a losing battle against other cleaner sources of energy.
The Zacks Coal industry is a eight-stock group within the broader Zacks Oil and Energy sector. The industry currently carries a Zacks Industry Rank #239, which places it in the bottom 3% of 246 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates lackluster performance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s position in the bottom 3% of the Zacks-ranked industries is a result of the negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts have lost confidence in this group’s earnings growth potential. Since December 2024, the coal industry’s earnings estimates for 2025 have declined 47.2% to $2.01 per share.
Before we present a few coal stocks that you may want to keep track of, let’s take a look at the industry’s recent stock market performance and valuation picture.
The Zacks Coal industry has outperformed the Zacks Oil and Gas sector but lagged the Zacks S&P 500 composite over the past year.
The stocks in the coal industry have lost 9% compared with the Zacks Oil-Energy sector’s decline of 14.5%. The Zacks S&P 500 composite has gained 6.9% in the same time frame.
Since coal companies have a lot of debt on their balance sheet, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio.
The industry is currently trading at a trailing 12-month EV/EBITDA of 4.7X compared with the Zacks S&P 500 composite’s 15.86X and the sector’s 4.36X.
In the past five years, the industry has traded as high as 7X and as low as 1.82X, with the median being 4.31X.
Both coal stocks mentioned below have strong met coal production volumes and carry a Zacks Rank #3 (Hold) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
SunCoke Energy: Lisle, IL-based SunCoke Energy is a raw material processing and handling company serving steel and power customers, with principal businesses in coke making and logistics. It has an annual 5.9 million tons of coke-making capacity. Despite challenges in the broader coal industry, SXC benefits from its focus on metallurgical coal, essential for steel production.
The Zacks Consensus Estimate for its 2025 and 2026 earnings per share has remained unchanged in the last 60 days. The current dividend yield of the company is 5.14%.
Ramaco Resources, Inc.: Lexington, KY-based Ramaco Resources is the developer of high-quality, low-cost metallurgical coal and is poised to benefit from improving metallurgical coal demand. The company has contracted nearly 3.5 million tons for 2025, out of which $1.9 million tons is contracted at a fixed price of $145 per ton. Depending on demand, the company can increase coal production volumes from the current levels. Ramaco plans to invest between $60 and $70 million in capital expenditures for 2025, with nearly $20 million allocated to growth initiatives.
METC’s initiative to extract rare earth elements at its Brook Mine in Wyoming positions the company to take advantage of the rising demand for critical minerals, which are vital for national defense applications and advanced technology industries. The Zacks Consensus Estimate for its 2025 and 2026 revenues reflects year-over-year growth of 6.28% and 18.57%, respectively. The current dividend yield of the company is 5.97%.
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