Coal has long been a staple in the global energy mix due to its abundance and cost-effectiveness. In recent years, the energy sector has seen a renewed interest in coal, spurred by surging energy demand, geopolitical tensions, supply chain disruptions, and fluctuating gas prices. Reuters reported U.S. thermal coal exports hit 5-year highs and earned over $5 billion in 2023.
As the world grapples with balancing energy needs and environmental concerns, investors could consider buying shares of CONSOL Energy Inc. (CEIX) that can capitalize on the coal resurgence. As a prominent producer of bituminous coal, CONSOL Energy operates through the Pennsylvania Mining Complex (PAMC) and CONSOL Marine Terminal (CMT) segments.
During the first quarter of 2024, CEIX’s PAMC segment produced 6.5 million tons of coal, which is impressive considering the company completed three longwell moves safely, efficiently, and timely in the quarter. In 2024, PAMC's contracted position is 22.9 million tons, and 13.5 million tons in 2025. The throughput volume at the CMT was 4.5 million tons.
Moreover, the Itmann Mining Complex continued to increase sales sequentially and finished the first quarter with sales of 193 thousand tons of Itmann and third-party coal, compared to 159 thousand tons during the fourth quarter of 2023. Also, Itmann Mining Complex improved its contracted position to 717 thousand tons in 2024.
The company also returned 89% of its first-quarter free cash flow to shareholders via share repurchases. During the first quarter, CEIX repurchased 440 thousand shares of its common stock for $36.90 million at an average price of $83.74 per share.
Jimmy Brock, CEO of CEIX, said, “During the first quarter of 2024, the CONSOL team delivered a very strong operational performance despite some timing related headwinds coming into the quarter.”
Shares of CEIX have gained 1.9% over the past six months and 33.2% over the year to close the last trading session at $96.10.
Let's look at factors that could influence CEIX’s performance in the upcoming months.
Robust Financials
For the first quarter that ended March 31, 2024, CEIX reported a total revenue of $565.04 million, beating the analysts’ estimate of $516.85 million. The company sold 6.1 million tons of PAMC coal, generating coal revenue of $416.20 million for the PAMC segment. Its adjusted EBITDA came in at $181.75 million, and the company reported net income of $101.89 million.
Furthermore, the company’s EPS was $3.39, compared to the consensus estimate of $2.54. Also, its cash inflows from operating activities were $77.50 million, and it posted a free cash flow of $41.30 million.
Optimistic Analyst Estimates
Analysts expect CEIX’s EPS for the third quarter (ending September 2024) to grow 10.2% year-over-year to $3.45. Moreover, the company has topped consensus revenue estimates in three of the trailing four quarters, which is impressive.
For the fiscal year ending December 2025, Street expects CEIX’s revenue and EPS to grow 3.5% and 19.3% from the previous year to $2.19 billion and $13.59, respectively.
Remarkable Historical Growth
Over the past three years, CEIX’s revenue has grown at a CAGR of 36.5%. The company’s net income and EPS have improved at impressive CAGRs of 233% and 220% over the same period, respectively. Further, the company’s EBITDA has grown at a CAGR of 64.7% over the same timeframe.
Also, CEIX’s levered free cash flow has grown at a CAGR of 70.1% over the past three years.
High Profitability
CEIX’s trailing-12-month EBIT margin of 25.36% is 32.2% higher than the 19.19% industry average. Similarly, the stock’s trailing-12-month EBITDA margin of 35.30% is 4.7% higher than the industry average of 33.72%. Also, its trailing-12-month net income margin of 21.96% is 91.5% higher than the industry average of 11.46%.
Moreover, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 39.51%, 23.92%, and 19.68% are favorably compared to the industry averages of 13.26%, 7.54%, and 5.60%, respectively. Its trailing-12-month levered FCF margin of 17.44% is 179.2% higher than the industry average of 6.25%.
Attractive Valuation
In terms of forward non-GAAP P/E, CEIX is trading at 8.53x, 28.9% lower than the industry average of 12x. Likewise, its forward Price/Cash Flow of 4.16x is 19% lower than the industry average of 5.13x. Also, the stock’s forward EV/EBITDA multiple of 4.41 is 26.1% lower than the industry average of 5.97.
Moreover, the stock’s forward EV/Sales multiple of 1.33 is 37.1% lower than the industry average of 2.11. Its forward Price/Sales of 1.35x is 9.3% lower than the industry average of 1.49x.
POWR Ratings Reflect Promise
CEIX’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. CEIX has an A grade for Quality, in sync with its higher profitability than its industry peers. It also has a B grade for Sentiment, in line with its favorable analyst estimates.
Further, CEIX has a B grade in Value, consistent with its lower-than-industry valuation.
Within the B-rated Coal industry, CEIX is ranked #4 out of 12 stocks.
Beyond what I have stated above, we have also given CEIX grades for Growth, Momentum, and Stability. Get all CEIX ratings here.
Bottom Line
CEIX’s financial performance was robust in the last reported quarter, surpassing analyst estimates for revenue and EPS. Its strategic focus on high-quality, low-cost coal production positions it to benefit from surging energy needs. In addition to efficient operations, Consol made significant strides in strengthening its balance sheet and enhancing shareholder value via share repurchases.
Considering its robust financials, low valuation, accelerating profitability, and optimistic growth outlook, CEIX could be an ideal buy for substantial gains.
How Does CONSOL Energy Inc. (CEIX) Stack Up Against Its Peers?
While CEIX has an overall POWR Rating of B, investors could also check out these other stocks within the Coal industry with B (Buy) ratings: SunCoke Energy, Inc. (SXC), Whitehaven Coal Ltd. (WHITF), and China Coal Energy Co. Ltd. ADR (CCOZY).
To explore more A or B-rated coal stocks, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
CEIX shares were unchanged in premarket trading Friday. Year-to-date, CEIX has declined -4.41%, versus a 14.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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