SXC: Industrial Services And Phoenix Synergies Will Drive Stronger 2025 EBITDA

Analysts have trimmed their price target on SunCoke Energy by $0.50 to $10.00, reflecting modestly lower fair value and earnings multiple assumptions. At the same time, stronger than expected Q3 EBITDA and higher 2025 guidance, supported by Phoenix Global contributions and anticipated synergies, continue to underpin the outlook.

Analyst Commentary

Analysts are parsing the mixed Q3 performance and updated 2025 outlook, balancing stronger near term execution in Industrial Services against integration risks and softer trends in certain legacy businesses.

Bullish Takeaways

Bullish analysts highlight Q3 adjusted EBITDA of $59.1M, which exceeded expectations and supports confidence in management’s ability to execute above prior forecasts.
Stronger than anticipated Industrial Services performance and a $10M contribution from Phoenix Global are viewed as early proof points that the acquisition can drive incremental growth and margin expansion.
The raised 2025 Industrial Services EBITDA guidance to $63M to $67M and overall 2025 adjusted EBITDA to $220M to $225M provides a clearer path to earnings growth that some see as not fully reflected in the current valuation.
Supportive contribution and synergy potential from Phoenix Global are cited as catalysts that could justify a higher multiple over time if integration milestones are met.

Bearish Takeaways

Bearish analysts point to the modest reduction in the price target as evidence that, despite better near term results, the long term valuation ceiling remains constrained by cyclical and operational risks.
Shortfalls in logistics and Domestic Coke volumes underscore execution challenges in legacy operations, which could limit overall earnings growth if demand does not recover.
Expected one time integration costs tied to Phoenix Global temper near term free cash flow, leading more cautious investors to question how quickly accretion will translate into shareholder returns.
Some remain wary that the raised guidance embeds ambitious synergy and performance assumptions, leaving less room for error if macro conditions or integration efforts disappoint.

What's in the News

Extended a 3 year cokemaking agreement with Cleveland Cliffs. Under this agreement, SunCoke will supply 500 thousand tons of metallurgical coke annually from its Haverhill facility in Ohio, starting January 1, 2026, with terms similar to existing contracts (Key Developments).
Revised 2025 consolidated earnings outlook and is now guiding for net income between $48 million and $58 million (Key Developments).

Valuation Changes

Fair value has decreased slightly from $10.50 to $10.00 per share, reflecting a modestly lower assessed intrinsic value.
The discount rate has edged down from 11.26 percent to approximately 11.16 percent, implying a marginally lower required return on equity risk.
Revenue growth assumptions are effectively unchanged, moving fractionally from 11.16 percent to about 11.16 percent, indicating a stable top line outlook.
Net profit margin estimates are essentially flat, dipping insignificantly from about 2.87 percent to roughly 2.87 percent, suggesting no material change in long-term profitability expectations.
Future P/E has declined moderately from 23.1x to about 22.0x, signaling a slightly lower valuation multiple being applied to forward earnings.

Diversified contracts and international expansion reduce revenue volatility and position SunCoke for stable, resilient earnings amid ongoing global steel demand.
Enhanced asset base and logistics integration increase operational efficiency and margin stability, supporting growth in both domestic and export markets.
Reliance on a few major customers and shifting steel market dynamics create substantial revenue risks, while increased spot sales and logistics softness threaten margins and financial stability.

Catalysts

About SunCoke Energy

Operates as an independent producer of coke in the Americas and Brazil.What are the underlying business or industry changes driving this perspective?

The acquisition of Phoenix Global positions SunCoke to diversify its customer base and service offerings-expanding into more resilient, long-term contracted industrial services for both electric arc furnace (EAF) and traditional steel producers, which reduces end-market cyclicality and is expected to drive higher, more stable revenue and cash flows.
Phoenix's international presence and integration into SunCoke's Logistics business creates opportunities to enter new export markets and expand the suite of mission-critical services, enhancing future top-line growth as global infrastructure investment-particularly in emerging economies-continues to drive steady steel demand.
Complementing SunCoke's core model, Phoenix's portfolio of long-term, fixed-revenue contracts with major steelmakers and EAF operators, alongside pass-through components that reduce commodity price risk, is likely to stabilize earnings and support margin resilience, insulating the company from short-term pricing pressures.
Expanded asset base with recent investments and upgrades (e.g., $75 million recent capital investments by Phoenix) increases operational efficiency and reliability, enabling SunCoke to benefit from industry trends toward more localized, resilient, and technologically advanced supply chains-potentially improving net margins.
The combination of take-or-pay contract structures, exposure to growing infrastructure projects requiring high-grade steel, and the ability to further grow within foundry coke and export markets creates multiple forward-looking revenue streams that capitalize on both domestic supply chain localization and global infrastructure investment trends.

SunCoke Energy Earnings and Revenue Growth

SunCoke Energy Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming SunCoke Energy's revenue will decrease by 9.5% annually over the next 3 years.
Analysts assume that profit margins will shrink from 4.0% today to 3.7% in 3 years time.
Analysts expect earnings to reach $50.8 million (and earnings per share of $0.66) by about September 2028, down from $73.6 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 26.3x on those 2028 earnings, up from 8.7x today. This future PE is greater than the current PE for the US Metals and Mining industry at 22.5x.
Analysts expect the number of shares outstanding to grow by 0.68% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.07%, as per the Simply Wall St company report.

SunCoke Energy Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Heavy customer concentration, especially reliance on large customers like Cliffs (which has signaled reduced need for third-party coke), exposes SunCoke to material revenue volatility if major contracts are not renewed or are reduced, directly threatening revenue and earnings stability.
A shift in the North American steel market as blast furnace capacity is idled or decommissioned (as discussed regarding Cliffs' post-Stelco acquisition coke self-sufficiency), could structurally reduce domestic demand for coke, challenging long-term revenue and reducing asset utilization.
Greater mix of spot coke sales (as seen in Q2) earns significantly lower margins than long-term contracts, leaving SunCoke vulnerable to market downturns and commodity cycles; this shift could pressure net margins and EBITDA through increased earnings volatility.
The company's recent acquisition of Phoenix increases leverage and integration risk; if anticipated synergies or contracted earnings do not materialize-particularly in cyclical or challenged steel markets-there could be negative impacts on free cash flow, net income, and overall financial flexibility.
Ongoing softness in logistics volumes (notably at CMT) linked to weak export coal demand, combined with exposure to uncertain export markets, signals persistent risk that unfavorable coal/commodities trends could further compress segment revenues and reduce consolidated earnings.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $12.0 for SunCoke Energy based on their expectations of its future earnings growth, profit margins and other risk factors.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.4 billion, earnings will come to $50.8 million, and it would be trading on a PE ratio of 26.3x, assuming you use a discount rate of 9.1%.
Given the current share price of $7.55, the analyst price target of $12.0 is 37.1% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
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.

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Diversified Industrial Services Will Transform Steel Markets Despite Risks