This article compares the revenue, operating income and net profit as well as the margins of America’s largest coal companies, and they are Peabody Energy (BTU), Arch Resources (ARCH) and Alliance Resource Partners (ARLP).
These coal miners are the biggest not only by market capitalization but also by coal volumes that they produce and sell.
As of September 2021, BTU is on the cusp of reaching $2 billion in market cap, and it is the largest among all coal miners discussed in this article.
On the other hand, Arch Resources and Alliance Resource Partners are slightly above $1 billion in market capitalization at the time this article was updated.
Additionally, all 3 of America’s largest coal miners have seen their market capitalization surging more than 1,000% in the last 3 years, with the majority of the appreciation happening in the past 52 weeks.
Therefore, these coal miners have put some of the hottest stocks on Wall Streets, including Tesla, to shame given their huge runs in recent weeks.
In short, Peabody, Arch Resources and Alliance Resource Partners have benefitted greatly from the recent commodity boom that has taken the world by surprise!
Without further ado, let’s get down to work!
Let’s first look at the revenue comparison of all 3 miners from a historical perspective as shown in the chart above.
Keep in mind that the plots in the chart above are created on a TTM basis to better reflect the long-term trend of the revenues.
From the TTM plots, investors can easily find out where the inflection point is and whether the trend has hit the bottom.
All told, according to the chart, the revenues of all 3 miners, namely BTU, ARCH and ARLP, have been on a decline since the end of fiscal 2019.
However, the trend of the revenue for all 3 miners seems to have hit the bottom in 1Q 2021 and has ticked higher in fiscal 2Q 2021, indicating that a possible turnaround might be on the horizon.
In this aspect, Peabody’s TTM revenue was reported to reach $2.8 billion in 2Q 2021, the highest among all mining companies.
Both Arch Resources and Alliance Resource Partners’ TTM revenues were in a tight race at $1.5 billion and $1.4 billion, respectively, reported in fiscal 2Q 2021 and were slightly higher compared to the prior quarter.
All in all, the declining trend of all 3 miners’ revenues seems to have bottomed out and was making a reverse in 2Q 2021 as indicated by the TTM plots.
TTM Operating Income
In terms of operating income, Peabody Energy is ranked at the bottom despite having the largest revenue stream among the 3 coal miners, indicating that it is the least profitable among all coal miners.
As of 2Q 2021, Peabody Energy was still in the red at -$169 million on a TTM basis.
Similarly, Arch Resources’ TTM operating income also was in the red in fiscal 2Q 2021 at -$228 million, slightly worse than that of Peabody reported in the same quarter.
While Alliance Resource Partners is the smallest coal miner based on revenue figures, it is having the highest operating income, notably at $176 million reported in 2Q 2021.
Similar to the revenue trend, the operating income trend also has ticked higher in fiscal 2Q 2021 on a TTM basis for all 3 coal companies, signaling a possible turnaround in profitability.
Of all 3 coal miners, Alliance Resource Partners or ARLP’s TTM operating income has improved the most in the last several quarters, turning from negative to positive while other coal miners, including Peabody and Arch Resources, were still incurring huge losses.
TTM Net Profit
Similar to the operating income, both Peabody and Arch Resources also have been incurring net losses despite having the largest revenue streams.
In particular, Peabody’s net loss has been the worst among the 3 coal miners.
In fiscal 2021 Q2, Peabody reported a net profit at -$305 million while Arch Resources reported a slightly better figure at -$248 million on a TTM basis.
On the flipped side, Alliance Resource Partners has been the only coal miner that is making a profit, notably at $131 million in 2Q 2021 on a TTM basis.
Again, of all 3 coal miners, Alliance Resource Partners or ARLP’s profit recovery has been the best, with TTM net profit already in the black in fiscal 2021 while Peabody and Arch Resources were still reeling in net losses.
TTM Adjusted EBITDA
The adjusted EBITDA is a non-GAAP measure and is a measure of the cash earnings of a company.
In the case of coal miners, the EBITDA comes from the companies’ own adjustment in which mostly non-core and non-recurring items are excluded during the measurement.
That said, looking at the chart above, ARLP is again the best coal company compared to Peabody and Arch Resources when it comes to the adjusted EBITDA.
As of 2Q 2021, ARLP earned as much as $453 million of EBITDA on a TTM basis, about 20% higher than Peabody and nearly 400% more than that of Arch Resources.
Keep in mind that Peabody used to have a higher EBITDA at nearly $1 billion as shown in the chart.
However, Peabody’s EBITDA has been deteriorating over the last 3 years and reached only $381 million as of 2Q 2021.
While all coal miners have seen their EBITDA declined in the last 3 years, the plunge seems to have moderated in recent quarters and has shown signs of a turnaround in the 1st half of fiscal 2021.
TTM Operating Margin
From a profitability perspective, we first look at the operating margin of the coal miners.
According to the chart, ARLP’s operating margin has been the highest compared to Peabody and Arch Resources since 2019.
As of 2Q 2021, ARLP has managed to achieve an operating margin of as high as 12.5% while Peabody and Arch Resources’ operating margins were still negative.
Keep in mind that all coal miners in the chart used to generate positive operating margins.
However, all coal miners’ operating margins have plunged significantly in fiscal 2020 even for ARLP to the negative regions, most notably due to the COVID-19 pandemic.
Of all coal miners, ARLP’s operating margin has recovered the fastest and was already back to positive figures in fiscal 2021 while others such as Peabody and Arch Resources were still incurring an operating loss.
In short, ARLP is the only coal miner that is making a profit from an operational perspective.
TTM Net Profit Margin
The net profit margin is another profitability metric that we should examine for coal miners.
According to the chart, ARLP is again the best coal miner reporting a net profit margin that is much higher than that of Peabody and Arch Resources.
In 2021 2Q, ARLP’s net profit margin reaches 9.3% whereas Peabody and Arch Resources’ net profit margins were still in the red.
Keep in mind that ARLP’s net profit margin had plunged to the red prior to 2021 but had recovered at a much faster pace than other coal miners.
On the other hand, Peabody’s net profit margin clocked in at around -10% while Arch Resources’ net profit margin was at -15% in fiscal 2021 2Q, both of which are much worse than that of Alliance Resource Partners.
Though Peabody and Arch Resources were still having net losses, the 2Q 2021 results were much better off than the results reported in prior quarters.
The improvement in net profit margins for Peabody and Arch Resources may signal a turnaround in the profitability of these giant coal miners.
TTM Adjusted EBITDA Margin
While most coal miners have incurred operating and net losses, they have been generating positive ETBIDA as shown in the chart above.
Again, ARLP is the best coal miner when it comes to adjusted EBITDA margin at close to 30% on average in the last 3 years.
As of 2021 2Q, ARLP’s adjusted EBITDA margin clocked in at 32.3%, a record high for the company since 2019 and was much higher than that of its peers such as Peabody and Arch Resources.
Peabody is ranked 2nd with an adjusted EBITDA margin of around 10% and the figure came to about 13.7% in fiscal 2021 Q2.
Arch Resources has the lowest adjusted EBITDA margin at 7.7% in fiscal 2021 2Q.
All companies are seeing their adjusted EBITDA margins moving higher post-2021, indicating a turnaround in profitability for the coal miners.
Peabody is the biggest coal miner whose TTM revenue was nearly twice higher than that of Arch Resources and Alliance Resource Partners.
Being the biggest does not necessarily mean that it is the most profitable.
In terms of operating and net profits, Alliance Resource Partners or ARLP beats Peabody and Arch Resources hands down.
ARLP generates much higher not only operating and net profits but also adjusted EBITDA despite being a smaller player in the coal industry.
The margins comparison also shows that Alliance Resource Partners is a much more profitable company than Peabody and Arch Resources.
In this regard, ARLP’s both operating and net profit margins are already in the black while Peabody and Arch Resources are still incurring losses.
In short, ARLP’s stock is a much better buy compared to Peabody and Arch Resources given the company’s higher efficiency in not only profitability but also margin.
References and Credits
1. All financial information in this article was obtained and referenced from the annual and quarterly reports which are available in the following links:
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The content in this article is for informational purposes only and is neither a recommendation nor a piece of financial advice to purchase a stock.
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