The Zacks Coal industry is facing significant headwinds as the use of coal in U.S. thermal power plants continues to decline. In 2025, demand is projected to weaken further due to the planned retirement of coal-fired units and the growing shift toward renewable energy sources for electricity generation. The ongoing energy transition, marked by utility operators systematically phasing out coal assets, continues to pressure the industry. As a result, coal production volumes are decreasing. Coal export volumes are expected to decline in both 2025 and 2026, largely due to the strength of the U.S. dollar and increased competition from natural gas and renewable energy sources. Despite a drop in coal production, Alliance Resource Partners (ARLP Quick QuoteARLP - Free Report) and SunCoke Energy (SXC Quick QuoteSXC - Free Report) , with high-quality met coal production volumes, are expected to gain during this difficult phase.

About the Coal Industry

The Zacks Coal industry comprises companies involved in the discovery and mining of coal. Coal is mined through the open-cast or the underground method. The commodity is valued for its energy content and used worldwide to generate electricity and manufacture steel and cement. Per the U.S. Energy Information Administration (“EIA”) report, the current U.S. estimated recoverable coal reserves are about 252 billion short tons, of which about 58% is underground mineable coal. Given the current production rates, coal resources are likely to last many years. Five states in the United States contribute 70% of the yearly coal production and 60% of the coal production from surface mining. Per EIA, the demand for coal will decline due to the usage of more renewable assets and a gradual shutdown of coal-powered generation units, hurting the prospects of the coal industry.

3 Trends Likely to Impact the Coal Industry

Coal Industry to Experience Softness in Exports: The U.S. coal companies are likely to be adversely impacted by lower production volumes in 2025 compared with 2024 and a likely decline in export volumes. The EIA forecasts in a recent release that although production and consumption levels are relatively stable, a reduction in U.S. coal exports this summer is expected to ease the pace of inventory drawdowns.

Despite Reliability, 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 from 17% in 2025 to 15% in 2026. Without substantial investment in pollution-control technologies for coal-fired power plants, domestic coal usage is likely to keep falling. As a result, coal-fired units are increasingly being relegated to backup roles, used primarily during emergency power needs.

U.S. Coal Production: Per EIA’s projection, coal production in the United States is expected to be 520 million short tons (MMst) in 2025, up from the 2024 volume of 512 MMst, due to higher usage of coal in power generation during the hot June 2025 compared with June 2024. However, EIA expects inventory declines to again pick up pace in 2026, when coal production is expected to drop by 9% from this year to 475 MMst and coal consumption to drop 6%. The coal operators continue to fight a losing battle against other cleaner sources of energy.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Coal industry is an eight-stock group within the broader Zacks Oil and Energy sector. The industry currently carries a Zacks Industry Rank #228, which places it in the bottom 7% of 245 Zacks industries.

The group’s Zacks Industry Rank, which is basically 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 7% 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 July 2024, the coal industry’s earnings estimates for 2025 have declined 33.4% to $2.89 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 picture.

 

Coal Industry Lags S&P 500 and Sector

The Zacks Coal industry has underperformed the Zacks Oil and Gas sector and the Zacks S&P 500 composite over the past year.

The stocks in the coal industry have lost 8.7% compared with the Zacks Oil-Energy sector’s decline of 3.1%. The Zacks S&P 500 composite has gained 11.7% in the same time frame.

One-Year Price Performance

 

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.

The industry is currently trading at a trailing 12-month EV/EBITDA of 5.58X compared with the Zacks S&P 500 composite’s 17.64X and the sector’s 4.81X.

In the past five years, the industry has traded as high as 7X and as low as 1.82X, with the median being 4.33X.

Enterprise Value-to EBITDA (EV/EBITDA) Ratio vs. S&P 500

 

Enterprise Value-to EBITDA (EV/EBITDA) Ratio vs. Sector

 

2 Coal Stocks to Keep a Close Watch On

Both coal stocks mentioned below have strong met coal production volumes. 

Alliance Resource Partners L.P.: Tulsa, OK-based Alliance Resource Partners produces and sells coal to utilities and industrial users in the United States. The firm produces coal from several mining complexes operated by its subsidiaries. ARLP earns royalty income from coal produced by its mining complexes and royalty income from mineral interests it owns in different basins. The company's total Sales ton in 2025 will be in the range of 32.75-34.75 million short tons.

The Zacks Consensus Estimate for its 2025 earnings per unit indicates a 0.4% increase in the past 60 days, while the same for 2026 earnings remained unchanged in the same time period. The stock has gained 6% over the past year against its industry’s decline of 7.4%. The current distribution yield is 10.49%. The firm currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price and Consensus: ARLP

SunCoke Energy: Lisle, IL-based SunCoke Energy is a raw material processing and handling company serving steel and power customers, with principal businesses in coke making and logistics. In 2025, the company plans to produce 4 million tons of domestic coke. Despite challenges in the broader coal industry, SXC benefits from its focus on metallurgical coal, essential for steel production. SunCoke entered into an agreement to acquire Phoenix Global. Phoenix Global’s long-term contracts align well with SunCoke’s earnings and cash flow stability, offering attractive fixed revenue elements and minimal direct exposure to fluctuations in commodity prices.

The Zacks Consensus Estimate for its 2025 and 2026 earnings per share has remained unchanged in the last 60 days. The company's current dividend yield is 5.64%. SunCoke Energy currently has a Zacks Rank #3 (Hold).

Price and Consensus: SXC