U.S. coal companies, analysts expect strong financial headwinds to continue through 2020

first_img FacebookTwitterLinkedInEmailPrint分享S&P Global Market Intelligence ($):“Flat is the new up,” one analyst said as coal companies reported another brutal quarter for investors in the space while domestic markets continued on a path of secular decline and export markets took a turn for the worse.For the last five years, the S&P 500 has consistently outperformed the SNL Coal Index, and the gap continues to widen through 2019. While coal equities struggled to win the favor of investors even when robust export markets offered coal companies an outlet to sell their fuel, share prices are plummeting as those opportunities diminish.“Export markets are challenging right now, and there is a widespread fear amongst investors that all U.S. coal producers will have to retreat significantly from the export markets, resulting in significant EBITDA declines,” Consol Energy Inc. President and CEO Jimmy Brock said on a Nov. 5 earnings call. Brock added that Consol was bracing for continued weak pricing through 2020, but remained optimistic about a potential recovery.Mark Levin, an analyst with Seaport Global Securities LLC, praised Consol’s assets and the product it sells in a Nov. 5 note. Levin said that, unlike many of its peers, the company managed to avoid revising its guidance. Since “flat is the new up,” Levin chalked up the company’s performance, in line with expectations, to the “victory column.”Share prices declined at major U.S. coal companies despite aggressive share buyback programs rolled out by most major U.S. coal producers in recent years. Staring down a diminishing domestic market, weaker export markets and the political uncertainty of a 2020 election, Levin recently encouraged the coal industry to “hoard cash.”Levin said management teams talking on third-quarter earnings calls sound like they are bracing for recent trends — near-record-low domestic consumption, met coal prices flirting with three-year lows, and overall weak coal export volumes — to continue into 2020. If a company has an unsustainable quarterly distribution or a non-essential project, it is time to cut it, he added.More ($): Already flailing through 2019, coal equities dove even lower in third quarter U.S. coal companies, analysts expect strong financial headwinds to continue through 2020last_img read more