April 16, 2024 - Warrior Met Coal (HCC) is Tuesday's IBD Stock Of The Day, as the coal producer and exporter has bucked the broader sector trend, advanced in 2024 and is nearing a buy point. HCC stock surged Tuesday.

The Alabama-based Warrior Met Coal is a miner and exporter of metallurgical (met) coal primarily used for steelmaking in Europe, South America and Asia. On Feb. 14, Warrior Met Coal closed the book on 2023, reporting worse-than-expected fourth-quarter earnings and revenue.

For the full year, EPS declined 25% to $9.59 with sales falling 3% to $1.68 billion. Wall Street expects earnings in 2024 to come in at $7.70 per share with revenue totaling $1.7 billion.

Metallurgical, or coking coal, is a critical ingredient in traditional blast-furnace steel production. U.S. met coal comes from Appalachian region mines and earns a hefty premium to the thermal coal used in power generation.

U.S. coal exports for the fourth quarter of 2023 increased 5.2% sequentially with an average price of $149.22 per ton, according to Energy Information Administration (EIA) data for Q4 released in early April.

Metallurgical coal exports in Q4 priced in at $202.47 per ton, down 14% compared to Q4 2023, according to the EIA. Met coal export prices spiked to a high of $343.91 per ton in Q2 2022.

Last week Citi upgraded HCC to a buy rating from neutral with a price target of 75, up from its previous 60. The firm wrote that it remains constructive in the midterm on met coal as a play on stronger steel production in India.

Warrior Met Coal Stock Performance

HCC shares jumped 8.6% to 68.22 in above-average-volume during stock market action Tuesday. Warrior Met Coal is up more than 10% in April and is now about 3% below an official 69.97 buy point from a cup base, according to MarketSurge analysis.

Warrior Met Coal has booked one monthly loss in the past six months, dating back to November 2023. Meanwhile, the 13 stocks collectively in IBD-tracked Energy-Coal industry group has declined 7.2% this year. This comes after coal stocks rallied 58% higher in 2023, despite a pullback from March to early June.

In 2022, Russia's invasion of Ukraine supercharged natural gas prices, making coal once again price-competitive and sending coal stocks into a rally. However, U.S. natural gas prices have since come back to earth and are currently trading around $1.70 per British thermal unit.