Rising AI Demand And US Policy Will Drive Coal Success

Key Takeaways

• Rising energy demand and favorable regulatory changes position the company for sustained revenue growth and improved profitability through enhanced sales and competitive operations.
  
• Strong execution on cost efficiencies, flexible market strategy, and shareholder returns are expected to drive margin expansion, stable cash flow, and increased intrinsic value.
  
• Heavy reliance on coal amid rising regulatory and stakeholder pressures threatens long-term revenue, margin stability, and competitiveness due to market, operational, and ESG risks.

Catalysts

Produces, sells, and exports metallurgical and thermal coals in the United States and internationally.

• Robust energy demand growth from domestic and emerging markets-most notably driven by increased power needs for AI/data centers and infrastructure expansion in Asia-are expected to create multi-year tailwinds for Core's coal products; this positions the company for sustained increases in contracted sales volumes and topline revenue.
  
• Recent U.S. government actions reducing regulatory burdens, cutting royalties on federal land production, and providing new production tax credits all directly lower operating cash costs and enhance the competitiveness of Core's Powder River Basin and export operations, supporting higher net margins and future earnings growth.
  
• Execution on merger synergies, including increased cost efficiency from best practice sharing, headcount optimization, and lower admin costs, is tracking above initial targets and should drive improved operating leverage and margin expansion even in a challenging commodity price environment.
  
• Core's ability to flexibly shift between domestic and export markets-enabled by logistics strength, diversified contract book, and high-quality coal-reduces exposure to spot price volatility and allows the firm to capture higher realized prices, supporting cash flow stability and potential upside to EBITDA.
  
• Accelerated share repurchases funded by strong free cash flow, coupled with ongoing cost/capex discipline and maintained low leverage, are likely to drive significant growth in earnings per share and bolster intrinsic value as market sentiment on the sector improves.

Core Natural Resources Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Core Natural Resources's revenue will grow by 15.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 0.6% today to 18.1% in 3 years time.
• Analysts expect earnings to reach $920.4 million (and earnings per share of $12.44) by about August 2028, up from $20.6 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 7.9x on those 2028 earnings, down from 186.6x today. This future PE is lower than the current PE for the US Oil and Gas industry at 13.0x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.86%, as per the Simply Wall St company report.

Core Natural Resources Future Earnings Per Share Growth

Risks

• The company remains heavily exposed to the global energy transition as the long-term shift toward renewables and stricter ESG mandates could erode demand for coal and associated products, ultimately pressuring long-term revenue streams and increasing compliance and financing costs, thus impacting net margins and earnings stability.
  
• Ongoing regulatory uncertainty-including tariff-related risks, export market volatility, and potential reversal of recent U.S. policy support-presents persistent risk to both domestic and seaborne demand, which can lead to unpredictable revenues and net margin compression over time as political climates shift.
  
• Company-specific risks include elevated dependence on operational recovery at Leer South and cost control at Itmann; if production ramp-ups or cost reductions fall short, especially given delayed restarts and decisions to idle capacity, future production volumes and associated revenues may remain below expectations, directly impacting earnings growth.
  
• Persistent underperformance in export metallurgical coal markets, as evidenced by soft pricing and company statements about subdued export demand, could be structural if global steel decarbonization accelerates or if competing suppliers outpace Core in technology and ESG adaptation, further depressing long-term revenue and margins.
  
• Heightened industry-wide stakeholder activism, ongoing public opposition to fossil fuel projects, and the increasing risk of rail service disruptions, supply chain bottlenecks, or infrastructure underinvestment could result in project delays, higher logistics costs, and reduced competitiveness, negatively affecting both cash flow predictability and overall net margins.

Valuation

• The analysts have a consensus price target of $94.75 for Core Natural Resources based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $110.0, and the most bearish reporting a price target of just $78.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $5.1 billion, earnings will come to $920.4 million, and it would be trading on a PE ratio of 7.9x, assuming you use a discount rate of 6.9%.
• Given the current share price of $74.76, the analyst price target of $94.75 is 21.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.