Global Urbanization And Sustainable Steelmaking Will Drive Metallurgical Coal Demand

Key Takeaways

• Blue Creek's early ramp-up and ongoing cost efficiencies position Warrior Met Coal for higher future margins and earnings, outpacing analyst expectations.
  
• Premium low-vol coal and policy tailwinds uniquely support sustained demand, providing opportunities for high market share and persistent revenue growth.
  
• Structural shifts toward decarbonization, steelmaking innovations, and ESG pressures threaten Warrior Met's demand, pricing, margins, and access to capital across key export markets.

Catalysts

Engages in the production and export of non-thermal steelmaking coal for the steel production by metal manufacturers in Europe, South America, and Asia.

• Analyst consensus highlights the Blue Creek project's transformational earnings impact starting in 2026, but the project is now meaningfully ahead of schedule, with the longwall startup accelerated by a full quarter and first commercial sales already achieved, which should drive 2026 production and revenue materially above current consensus as higher volumes and earlier cash flows kick in.
  
• Analysts broadly agree Warrior's low-cost structure positions it to benefit as prices recover, but underappreciate the possibility that ongoing aggressive cost management and rapid scaling of Blue Creek could push cash costs below prior guidance, enabling substantially higher net margins and earnings as volumes surge and pricing cycles normalize.
  
• As global urbanization and large-scale renewable infrastructure projects accelerate in major emerging markets, Warrior's premium low-vol coal is uniquely positioned to enjoy sustained demand growth, supporting persistent revenue expansion over the coming decade that may outpace global steel industry averages.
  
• U.S. resource nationalism and miner-favorable policy shifts, such as the new 45X tax credit for critical minerals including metallurgical coal, could yield substantial direct financial benefits-with potential tax credits of $30 million to $40 million per year or more-supporting increased free cash flow and direct shareholder returns well above industry peers.
  
• Industry-wide underinvestment combined with Warrior's proven ability to bring major projects online early and on budget could enable it to seize market share at premium pricing as global supply tightens, driving both volume and realized price premiums that materially uplift EBITDA and long-term earnings power.

Warrior Met Coal Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Warrior Met Coal compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Warrior Met Coal's revenue will grow by 31.0% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 3.3% today to 36.1% in 3 years time.
• The bullish analysts expect earnings to reach $989.9 million (and earnings per share of $17.0) by about August 2028, up from $40.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 5.0x on those 2028 earnings, down from 80.3x today. This future PE is lower than the current PE for the US Metals and Mining industry at 22.0x.
• Analysts expect the number of shares outstanding to grow by 0.49% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.45%, as per the Simply Wall St company report.

Warrior Met Coal Future Earnings Per Share Growth

Risks

• The accelerating global decarbonization agenda and tightening climate regulations are likely to erode long-term metallurgical coal demand, posing a structural risk of revenue decline for Warrior Met as steelmakers and industries increasingly shift to lower-carbon alternatives.
  
• Warrior Met faces sustained pressure on net realized prices and margins due to excess global steel supply, particularly record exports of low-cost Chinese steel and a well-supplied steelmaking coal market-highlighted by a 24% year-over-year drop in average coal index pricing and a shift to lower-margin high vol A products.
  
• The company's heavy geographic reliance on exports to Asia and Europe, with over 50% of sales now concentrated in Asia and no sales into China due to tariffs, heightens its exposure to international trade disputes, currency headwinds, or economic downturns in these markets, which could compress future earnings.
  
• Secular advancements in steelmaking technology, such as greater adoption of electric arc furnaces and green hydrogen, threaten to shrink Warrior Met's core market, potentially reducing addressable demand and negatively impacting long-term revenue and valuation.
  
• The industry's higher susceptibility to environmental, social, and governance (ESG) pressures, including increasing compliance costs from regulations and diminishing access to capital as investors divest from coal assets, is likely to elevate operating costs and constrain future net income and cash flow for Warrior Met Coal.

Valuation

• The assumed bullish price target for Warrior Met Coal is $75.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Warrior Met Coal's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $75.0, and the most bearish reporting a price target of just $50.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $2.7 billion, earnings will come to $989.9 million, and it would be trading on a PE ratio of 5.0x, assuming you use a discount rate of 7.5%.
• Given the current share price of $61.59, the bullish analyst price target of $75.0 is 17.9% 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.