Top Coal Stocks for Q4 2020

The coal industry remains a major supplier to key industries such as steel and utilities through large numbers of coal-fired electricity plants. It remains a dominant energy supplier despite growing global awareness of climate change and moves to reduce the use of coal, one of the world’s most plentiful fossil fuels. Companies like Arch Resources Inc. (ARCH) and Teck Resources Ltd. (TECK) mine, process, and distribute coal for electricity generation. Coal prices have declined substantially since early 2019 and dropped precipitously in March 2020. Though prices have recovered somewhat, coal companies continue to struggle.

Coal stocks, as represented by the VanEck Vectors Coal ETF (KOL), have dramatically underperformed the broader market over the past year. KOL has provided a total return of -30.5% over the past 12 months compared to the Russell 1000’s total return of 13.8%, as of September 11, 2020. All statistics in the tables below are as of September 14.

Here are the top 3 coal stocks with the best value, profitability, and performance.

Best Value Coal Stocks

These are the coal stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.

Source: YCharts

• China Shenhua Energy Co. Ltd.: China Shenhua Energy is the leading publicly listed coal company in China. The company and its subsidiaries are engaged mainly in the production and sale of coal and electricity, as well as railway, port, and shipping transportation. China Shenhua reported a 9.8% year-over-year (YOY) decline in revenue and a 14.5% YOY decline in profits in the first half of fiscal 2020, which ended June 30, 2020. The company said that its coal production and downstream demand was adversely impacted by the COVID-19 pandemic, which has caused a sharp contraction in global economic growth.
• Warrior Met Coal Inc.: Warrior Met Coal is a producer and exporter of metallurgical coal. Its primary customers include steel producers in Europe, South America, and Asia. The company reported a net loss of $9.2 million as revenue fell 58.8% in Q2 2020, which ended June 30, 2020. Warrior Met Coal also said that the weaker results reflected the challenging environment caused by the pandemic.
• Arch Resources Inc.: Arch Resources, formerly named Arch Coal, is a top producer of thermal and metallurgical coal from surface and underground mines. It has operations across the U.S. The company reported a net loss of $49.3 million as revenue fell 44.0% in Q2 2020, which ended June 30, 2020. Arch noted that the pandemic’s adverse impact on the global economy was creating uncertainties for its business. 

Most Profitable Coal Stocks

This is the only profitable coal stock for the most recent quarter, even though it posted a year-over-year (YOY) earnings per share (EPS) decline during that period. All other coal stocks we looked at reported losses for the most recent quarter. A company’s ability to maintain profitability in a difficult business environment can be a sign of good management and/or a strong business model.

Source: YCharts

• China Shenhua Energy Co. Ltd.: See above for company description.

Coal Stocks with the Best Performance

These are the coal stocks that had the smallest declines in total return over the past 12 months out of the companies we looked at.

Source: YCharts

• China Shenhua Energy Co. Ltd.: See above for company description.
• Warrior Met Coal Inc.: See above for company description.
• Arch Resources Inc.: See above for company description.