Blue Creek Launch Will Unlock Low-Cost Metallurgical Coal Supply

Key Takeaways

• Early expansion and operational efficiencies from Blue Creek position Warrior to capture premium pricing and structural margin improvement amid persistent global steel demand.
  
• New tax credits and supply constraints enhance Warrior's cost advantage, cash flow, and competitive standing as higher-cost rivals exit the market.
  
• Heavy exposure to weak global steel and coal markets, shifting sales mix, industry risks, and capital pressures undermine pricing, margins, and long-term financial stability.

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.

• The ahead-of-schedule and on-budget launch of the Blue Creek longwall in early Q1 2026 accelerates Warrior Met Coal's transition from capital investment to higher-volume revenue generation, unlocking increased production capacity and lower-cost, higher-quality tons. This positions the company to grow both revenues and net margins as volumes ramp and cost efficiencies are realized.
  
• The classification of metallurgical coal as a 'critical mineral' for new U.S. tax credits (Section 45X, starting in 2026) directly reduces Warrior's production costs by an estimated $30-40 million or more per year. This expected multi-year tax benefit should structurally boost future earnings and free cash flow.
  
• Warrior's focus on premium, low-volatility, high-quality met coal with geographic proximity to Gulf export terminals enhances its ability to command price premiums and deliver reliably, making the company a preferred supplier amid global infrastructure growth-especially as Western and allied nations prioritize secure, non-sanctioned materials. This supports higher long-term realized prices and margin resilience.
  
• Sustained infrastructure development and new steelmaking capacity-particularly in emerging economies like India, which is seeing 7%+ growth in pig iron production-drives enduring demand for premium met coal. Warrior's early expansion of supply through Blue Creek aligns it to capture these secular growth opportunities, supporting volume-driven revenue growth.
  
• Industry-wide supply constraints caused by limited new project development and tougher global environmental regulations serve as a tailwind for existing, cost-efficient producers. As higher-cost competitors exit, Warrior is positioned to benefit from supportive pricing, reduced competition, and structurally improved EBITDA margins.

Warrior Met Coal Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Warrior Met Coal's revenue will grow by 18.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.3% today to 31.0% in 3 years time.
• Analysts expect earnings to reach $636.5 million (and earnings per share of $7.42) by about August 2028, up from $40.3 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $180 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 6.6x on those 2028 earnings, down from 83.2x today. This future PE is lower than the current PE for the US Metals and Mining industry at 21.2x.
• 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 7.43%, as per the Simply Wall St company report.

Warrior Met Coal Future Earnings Per Share Growth

Risks

• Persistent weakness in global steel demand, driven by excess Chinese steel exports, weak economic activity, and over-supplied steelmaking coal markets, is putting downward pressure on coal prices and may lead to sustained lower revenues and compressed margins.
  
• Warrior Met Coal's increasing dependence on Asian markets-now over half of sales, primarily outside China-concentrates exposure to regional demand shifts, tariffs, and price competition, elevating revenue volatility and limiting pricing power.
  
• A higher mix of lower-margin high vol A coal sales, primarily into the Pacific Basin on a CFR basis, coupled with widening price gaps between premium low-vol and lower-grade coal indices, reduces gross price realizations and negatively impacts net margins and earnings.
  
• Ongoing capital intensity and ramp-up costs associated with the Blue Creek mine, combined with uncertain ability to contractually place increased volumes, could lead to higher capital expenditures and operational risk, straining free cash flow and return on investment if market conditions remain weak.
  
• Structural industry risks such as decarbonization mandates, ESG-related capital constraints, and legal or regulatory pressures may hinder long-term demand for metallurgical coal, increase operating costs, and restrict access to capital, adversely affecting long-term earnings growth and valuation.

Valuation

• The analysts have a consensus price target of $64.0 for Warrior Met Coal 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 $75.0, and the most bearish reporting a price target of just $50.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.1 billion, earnings will come to $636.5 million, and it would be trading on a PE ratio of 6.6x, assuming you use a discount rate of 7.4%.
  
• Given the current share price of $63.85, the analyst price target of $64.0 is 0.2% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• 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.