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2 Coal Stocks Worth Watching as the Industry Battles Challenges
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The Zacks Coal industry is facing significant headwinds as the use of coal in U.S. thermal power plants continues to decline. Per the U.S. Energy Information Administration (“EIA”), in 2025, demand for coal is projected to improve marginally due to overall electricity demand and higher costs for natural gas generation. Yet, given the ongoing energy transition, marked by utility operators systematically phasing out coal assets, coal demand is expected to drop in 2026.
Per EIA, coal export volumes are expected to decline in 2025, due to a global supply surplus and falling prices. Despite a drop in coal production, Alliance Resource Partners (ARLP - Free Report) and SunCokeEnergy (SXC - Free Report) , with high-quality met coal production volumes, are expected to gain during this challenging phase.
About the Industry
The Zacks Coal industry consists of companies engaged in the exploration and mining of coal, which is extracted through either open-cast or underground methods. Valued for its high energy content, coal remains a key resource globally for electricity generation and the production of steel and cement. Per the EIA finding, the United States has an estimated 252 billion short tons of recoverable coal reserves, with roughly 58% classified as underground mineable. At current production levels, these reserves are expected to last for many decades. Notably, five U.S. states account for about 70% of annual coal production and 60% of coal extracted from surface mines. However, the EIA projects that coal demand will continue to decline as renewable energy adoption accelerates and coal-fired power plants are gradually retired, posing long-term challenges for the industry.
3 Trends Likely to Impact the Coal Industry
Coal Industry to Experience Softness in Exports: U.S. coal companies are likely to be adversely impacted by lower coal export volumes in 2025 compared with 2024, with this decline expected to continue in 2026. The EIA forecasts a drop in export volumes in 2025 due to a decrease in metallurgical coal exports. In 2026, export volumes are expected to be down due to reduced U.S. coal production and the depletion of coal inventories at electric power plants.
Despite Reliability, Emission Policy to Hurt the Coal Industry: Coal remains a dependable energy source, capable of providing around-the-clock electricity from generation units. However, rising environmental concerns are leading to a steady decline in its use for power generation. The United States’ Sustainability Plan targets a transition to 100% carbon pollution-free electricity by 2030 and net-zero emissions by 2050. This shift is being accelerated by the increasing adoption of natural gas and renewable energy sources like solar and wind. Natural gas has become more cost-efficient due to advancements in fracking technology, while renewables have gained traction thanks to falling production costs and supportive government initiatives. According to the EIA, coal’s share in U.S. electricity generation is expected to decline from 17% in 2025 to 16% in 2026. Without substantial investment in pollution-control technologies for coal-fired power plants, domestic coal usage is likely to keep falling. As a result,
U.S. Coal Production: Per EIA’s projection, coal production in the United States is expected to be 531 million short tons (MMst) in 2025, up from the 2024 volume of 512 MMst, due to higher usage of coal in power generation during the hot June 2025 compared with June 2024 and an increase in the cost of natural gas. However, EIA expects inventory declines to again pick up pace in 2026, when coal production is expected to drop by nearly 7% from this year to 494 MMstand coal consumption to drop 3.4%. The coal operators continue to fight a losing battle against other cleaner sources of energy.
Zacks Industry Rank Indicates Gloomy Prospects
The Zacks Coal industry is a seven-stock group within the broader Zacks Oil and Energy sector. The industry currently carries a Zacks Industry Rank #230, which places it in the bottom 5% of 243 Zacks industries.
The group’s Zacks Industry Rank, which is 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 5% 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 October 2024, the coal industry’s earnings estimates for 2025 have declined 93.1% to 26 cents per share.
efore 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
Coal Industry Outperforms S&P 500 and Sector
The Zacks Coal industry has outperformed the Zacks Oil and Gas sector and the Zacks S&P 500 composite over the past year.
The stocks in the coal industry have gained 22.7% compared with the Zacks Oil-Energy sector’s decline of 4.2%. The Zacks S&P 500 composite has gained 13.9% in the same time frame.
One-Year Price Performance
Coal Industry's Current Valuation
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 8.84X compared with the Zacks S&P 500 composite’s 18.12X and the sector’s 4.96X.
In the past five years, the coal industry has traded as high as 8.99X and as low as 1.82X, with the median being 4.33X.
Enterprise Value-to EBITDA (EV/EBITDA) Ratio vs. S&P 500
Enterprise Value-to EBITDA (EV/EBITDA) Ratio vs. Sector
2 Coal Stocks to Keep a Close Watch On
Both coal stocks mentioned below have strong met coal production volumes.
Alliance Resource Partners L.P.: Tulsa, OK-based Alliance Resource Partners produces and sells coal to utilities and industrial users in the United States. The firm produces coal from several mining complexes operated by its subsidiaries. ARLP earns royalty income from coal produced by its mining complexes and royalty income from mineral interests it owns in different basins. The company's total Sales ton in 2025 will be in the range of 32.75-34 million short tons.
The Zacks Consensus Estimate for its 2025 and 2026 earnings per unit has remained the same in the past 60 days. The current distribution yield is 9.58%. The firm currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: ARLP
SunCokeEnergy: Lisle, IL-based SunCokeEnergy is a raw material processing and handling company serving steel and power customers, with principal businesses in coke making and logistics. Despite challenges in the broader coal industry, SXC benefits from its focus on metallurgical coal, essential for steel production. The company’s acquisition of Phoenix Global will boost its earnings and cash flow stability, offering attractive fixed revenue elements and minimal direct exposure to fluctuations in commodity prices.
The Zacks Consensus Estimate for its 2025 and 2026 earnings per share has remained unchanged in the last 60 days. The company's current dividend yield is 5.82%. SunCokeEnergy currently has a Zacks Rank #3.
Price and Consensus: SXC
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2 Coal Stocks Worth Watching as the Industry Battles Challenges
The Zacks Coal industry is facing significant headwinds as the use of coal in U.S. thermal power plants continues to decline. Per the U.S. Energy Information Administration (“EIA”), in 2025, demand for coal is projected to improve marginally due to overall electricity demand and higher costs for natural gas generation. Yet, given the ongoing energy transition, marked by utility operators systematically phasing out coal assets, coal demand is expected to drop in 2026.
Per EIA, coal export volumes are expected to decline in 2025, due to a global supply surplus and falling prices. Despite a drop in coal production, Alliance Resource Partners (ARLP - Free Report) and SunCokeEnergy (SXC - Free Report) , with high-quality met coal production volumes, are expected to gain during this challenging phase.
About the Industry
The Zacks Coal industry consists of companies engaged in the exploration and mining of coal, which is extracted through either open-cast or underground methods. Valued for its high energy content, coal remains a key resource globally for electricity generation and the production of steel and cement. Per the EIA finding, the United States has an estimated 252 billion short tons of recoverable coal reserves, with roughly 58% classified as underground mineable. At current production levels, these reserves are expected to last for many decades. Notably, five U.S. states account for about 70% of annual coal production and 60% of coal extracted from surface mines. However, the EIA projects that coal demand will continue to decline as renewable energy adoption accelerates and coal-fired power plants are gradually retired, posing long-term challenges for the industry.
3 Trends Likely to Impact the Coal Industry
Coal Industry to Experience Softness in Exports: U.S. coal companies are likely to be adversely impacted by lower coal export volumes in 2025 compared with 2024, with this decline expected to continue in 2026. The EIA forecasts a drop in export volumes in 2025 due to a decrease in metallurgical coal exports. In 2026, export volumes are expected to be down due to reduced U.S. coal production and the depletion of coal inventories at electric power plants.
Despite Reliability, Emission Policy to Hurt the Coal Industry: Coal remains a dependable energy source, capable of providing around-the-clock electricity from generation units. However, rising environmental concerns are leading to a steady decline in its use for power generation. The United States’ Sustainability Plan targets a transition to 100% carbon pollution-free electricity by 2030 and net-zero emissions by 2050. This shift is being accelerated by the increasing adoption of natural gas and renewable energy sources like solar and wind. Natural gas has become more cost-efficient due to advancements in fracking technology, while renewables have gained traction thanks to falling production costs and supportive government initiatives. According to the EIA, coal’s share in U.S. electricity generation is expected to decline from 17% in 2025 to 16% in 2026. Without substantial investment in pollution-control technologies for coal-fired power plants, domestic coal usage is likely to keep falling. As a result,
U.S. Coal Production: Per EIA’s projection, coal production in the United States is expected to be 531 million short tons (MMst) in 2025, up from the 2024 volume of 512 MMst, due to higher usage of coal in power generation during the hot June 2025 compared with June 2024 and an increase in the cost of natural gas. However, EIA expects inventory declines to again pick up pace in 2026, when coal production is expected to drop by nearly 7% from this year to 494 MMstand coal consumption to drop 3.4%. The coal operators continue to fight a losing battle against other cleaner sources of energy.
Zacks Industry Rank Indicates Gloomy Prospects
The Zacks Coal industry is a seven-stock group within the broader Zacks Oil and Energy sector. The industry currently carries a Zacks Industry Rank #230, which places it in the bottom 5% of 243 Zacks industries.
The group’s Zacks Industry Rank, which is 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 5% 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 October 2024, the coal industry’s earnings estimates for 2025 have declined 93.1% to 26 cents per share.
efore 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
Coal Industry Outperforms S&P 500 and Sector
The Zacks Coal industry has outperformed the Zacks Oil and Gas sector and the Zacks S&P 500 composite over the past year.
The stocks in the coal industry have gained 22.7% compared with the Zacks Oil-Energy sector’s decline of 4.2%. The Zacks S&P 500 composite has gained 13.9% in the same time frame.
One-Year Price Performance
Coal Industry's Current Valuation
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 8.84X compared with the Zacks S&P 500 composite’s 18.12X and the sector’s 4.96X.
In the past five years, the coal industry has traded as high as 8.99X and as low as 1.82X, with the median being 4.33X.
Enterprise Value-to EBITDA (EV/EBITDA) Ratio vs. S&P 500
Enterprise Value-to EBITDA (EV/EBITDA) Ratio vs. Sector
2 Coal Stocks to Keep a Close Watch On
Both coal stocks mentioned below have strong met coal production volumes.
Alliance Resource Partners L.P.: Tulsa, OK-based Alliance Resource Partners produces and sells coal to utilities and industrial users in the United States. The firm produces coal from several mining complexes operated by its subsidiaries. ARLP earns royalty income from coal produced by its mining complexes and royalty income from mineral interests it owns in different basins. The company's total Sales ton in 2025 will be in the range of 32.75-34 million short tons.
The Zacks Consensus Estimate for its 2025 and 2026 earnings per unit has remained the same in the past 60 days. The current distribution yield is 9.58%. The firm currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: ARLP
SunCokeEnergy: Lisle, IL-based SunCokeEnergy is a raw material processing and handling company serving steel and power customers, with principal businesses in coke making and logistics. Despite challenges in the broader coal industry, SXC benefits from its focus on metallurgical coal, essential for steel production. The company’s acquisition of Phoenix Global will boost its earnings and cash flow stability, offering attractive fixed revenue elements and minimal direct exposure to fluctuations in commodity prices.
The Zacks Consensus Estimate for its 2025 and 2026 earnings per share has remained unchanged in the last 60 days. The company's current dividend yield is 5.82%. SunCokeEnergy currently has a Zacks Rank #3.
Price and Consensus: SXC