U.S. coal equities are gaining momentum as metallurgical coal prices in China jumped 10-15% in a single week, driven by supply disruptions and potential El Niño impacts on global markets. Jefferies has identified five coal stocks with varying risk profiles, emphasizing that while the rally may persist through 2026, a partial reversal is possible in early 2027.
Warrior Met Coal remains the top U.S. pick, supported by its premium low-volatility metallurgical coal production, variable cost structure, and net cash position. The company’s Blue Creek mine expansion is expected to drive organic growth, with Jefferies estimating 2027 enterprise value to EBITDA at 4.6x and a free cash flow yield of 12.2%. Second-quarter earnings exceeded expectations, with adjusted earnings of $1.65 per share on revenue of $509.7 million.
Core Natural Resources also received a Buy rating, cited for its strong cost performance and cash flow generation in Q2. The stock trades at an estimated 2027 EV/EBITDA of 4.7x and a 10.7% free cash flow yield, positioning it to benefit from higher metallurgical coal prices without relying solely on price strength for returns.
Peabody Energy, rated Buy, faces operational risks tied to its Centurion asset ramp-up but could see near-term support from elevated coal prices. The company reported a wider-than-expected Q2 loss of $0.74 per share but trades at a 2027 EV/EBITDA of 3.8x and a 10.5% free cash flow yield under an assumed Centurion ramp. Following earnings, Benchmark reduced its price target to $36 while maintaining a Buy rating.
Ramaco Resources, another Buy-rated pick, is positioned as a high-risk, high-reward play with operational improvements and organic growth. The stock is valued at an 8.5x 2027 EV/EBITDA and a 7.7% free cash flow yield, though Q2 results showed mixed performance with revenue of $144.8 million beating estimates but a wider-than-expected loss of $0.26 per share.
Alpha Metallurgical Resources, rated Hold, remains highly leveraged to metallurgical coal price swings and faces weak market conditions. The company posted a Q2 loss of $0.96 per share on $492.86 million in revenue, missing analyst expectations on both metrics.
