US Coal Earnings Preview

Research evidence excerpt

US Coal Earnings Preview

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METC -$2 $8 $6 Downside

is unique in the US coal space in that it is generating FCF and returning capital to shareholders now. . AMR $30 $29 $49 Balanced

Source: Company filings, Visible Alpha, Jefferies' estimates

Peabody: We expect a modest sequential increase in BTU's EBITDA, although FCF in 2Q will likely

have remained negative. We expect US Thermal EBITDA to have declined as a result of increased

costs (diesel). PRB coal is sold under contract at fixed prices, so higher costs will have directly led to

lower margins. Costs in the Seaborne Thermal segment should have also increased due to higher

diesel prices and other inflationary pressures, but these cost pressures should have been partially

offset by higher realizations. Centurion could become a significant positive driver for Peabody,

but this clearly depends on the company delivering operationally at this key asset. There is risk

that production guidance for Centurion will be lowered again due to ongoing issues. All things

considered, we do not expect this to be a positive quarterly update for Peabody from an operational

perspective, although a release of >$200m of restricted cash could lead to a step up in capital

returns. Share buybacks at the current price would be a positive, in our view.

Alpha: We expect Alpha's 2Q EBITDA to have been slightly down from 1Q, and FCF should have

been negative. Alpha disclosed a damaged stacker reloader last month, which could limit its ability

to hit full production in 2H as per the 2026 guidance. Alpha has not cut FY guidance but may do so

with the 2Q earnings release. While cost cuts could be helpful, the key for AMR is higher high-vol

prices, which likely depends on unprofitable supply being removed from the market.