Three Coal Stocks to Watch as the Industry Battles Multiple Challenges
January 7, 2026 - The Zacks Coal industry is facing multiple headwinds as the use of coal in U.S. thermal power plants continues to decline. Per the U.S. Energy Information Administration (“EIA”), in 2026, demand for coal is projected to decline as usage of renewable sources increases for electricity generation. In addition, given the ongoing energy transition, marked by utility operators systematically phasing out coal assets, coal demand is expected to drop in 2026.
Per EIA, coal export volumes are expected to improve in 2026, due to an increase in metallurgical coal export volumes. Despite a drop in coal production in 2026, Warrior Met Coal HCC, Peabody Energy Corporation BTU and Ramaco Resources METC, with high-quality met coal production volumes, are expected to gain during this challenging phase.
About the Industry
The Zacks Coal industry consists of companies engaged in the exploration and mining of coal, which is extracted through either open-cast or underground methods. Valued for its high energy content, coal remains a key resource globally for electricity generation and the production of steel and cement. Per the EIA finding, the United States has an estimated 252 billion short tons of recoverable coal reserves, with roughly 58% classified as underground mineable. At current production levels, these reserves are expected to last for many decades. Notably, five U.S. states account for about 70% of annual coal production and 60% of coal extracted from surface mines. However, the EIA projects that coal demand will continue to decline as renewable energy adoption accelerates and coal-fired power plants are gradually retired, posing long-term challenges for the industry.
3 Trends Likely to Impact the Coal Industry
Despite Reliability, the Emission Policy to Hurt the Coal Industry: Coal remains a dependable energy source, capable of providing around-the-clock electricity from generation units. However, rising environmental concerns are leading to a steady decline in its use for power generation. The United States’ Sustainability Plan targets a transition to 100% carbon pollution-free electricity by 2030 and net-zero emissions by 2050. This shift is being accelerated by the increasing adoption of natural gas and renewable energy sources like solar and wind.
Natural gas has become more cost-efficient due to advancements in fracking technology, while renewables have gained traction thanks to falling production costs and supportive government initiatives. According to the EIA, coal’s share in U.S. electricity generation is expected to decline in 2026 from 2025 levels. Without substantial investment in pollution-control technologies for coal-fired power plants, domestic coal usage is likely to keep falling due to the retirement of coal-fired capacity.
U.S. Coal Production: Per EIA’s projection, coal production in the United States is expected to be 520 million short tons (MMst) in 2026, down from the 2024 volume of 531 MMst, due to lower usage of coal in power generation and higher usage of renewable sources. The utilities have also built large coal inventories in 2025, which is also reducing coal demand, ultimately having an adverse impact on production. Coal’s share in the U.S. electric generation is expected to drop 100 basis points in 2026 to touch 16%.
Coal Industry to Experience Marginal Increase in Exports: U.S. coal companies are likely to gain from 1% increase in export volumes in 2026 compared with 2025, per the projection provided by EIA. The improvement in export volumes was driven by an 8% increase in metallurgical shipments, aided by the longwall expansion at Alabama’s Blue Creek mine and the reopening of the Leer South and Longview mines in West Virginia.
Zacks Industry Rank Indicates Weak Prospects
The Zacks Coal industry is a seven-stock group within the broader Zacks Oil and Energy sector. The industry currently carries a Zacks Industry Rank #235, which places it in the bottom 4% of 244 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates lackluster performance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s position in the bottom 4% of the Zacks-ranked industries is a result of the negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts have lost confidence in this group’s earnings growth potential. Since December 2024, the coal industry’s earnings estimates for 2026 have declined 26% to $3.31 per share.
Before we present a few coal stocks that you may want to keep track of, let’s take a look at the industry’s recent stock market performance and valuation.
Coal Industry Outperforms the S&P 500 and the Sector
The Zacks Coal industry has outperformed the Zacks Oil and Gas sector and the Zacks S&P 500 composite over the past year.
The stocks in the coal industry have gained 28.8% compared with the Zacks Oil-Energy sector’s rally of 8.9%. The Zacks S&P 500 composite has gained 19.7% in the same time frame.
Coal Industry's Current Valuation
Since coal companies have a lot of debt on their balance sheet, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio.
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