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.
Amid the ongoing drop in coal usage and production, investors can watch coal stocks like Core Natural Resources, Inc. CNR, Alliance Resource Partners ARLP and Ramaco Resources METC, which have high-quality met coal production volumes, are expected to gain during this challenging phase.
About the Industry
The Zacks Coal industry comprises companies involved in the exploration and extraction of coal through both surface and underground mining methods. Coal remains an important energy resource due to its high energy content and widespread use in electricity generation, as well as in steel and cement production. According to the EIA, the United States possesses nearly 252 billion short tons of recoverable coal reserves, with about 58% suitable for underground mining. At current production rates, these reserves are expected to support coal supply for decades. Coal production is highly concentrated, with five states accounting for nearly 70% of total U.S. output and 60% of surface-mined coal. Yet, rising renewable energy adoption and the ongoing retirement of coal-fired power plants are expected to reduce coal demand over time, creating long-term challenges for the industry.
3 Trends That Could Weigh on the Coal Industry
Drop in U.S. Coal Production and Usage: Per EIA’s projection, coal production in the United States is expected to be 518 million short tons (MMst) in 2026, down 2% from the 2025 volume, due to lower usage of coal in power generation and higher usage of renewable sources. Coal production is expected to drop further by 4% year over year in 2027 and total 497 MMst. Per EIA, coal’s share of U.S. electricity generation is projected to decline 100 basis points annually in 2026 and 2027, reaching 16% and 15%, respectively. EIA expects coal exports to increase modestly in 2026, supported mainly by higher metallurgical coal exports as additional production capacity comes online. Coal exports can help coal producers offset challenges arising from weakening domestic coal demand by providing access to additional markets and revenue opportunities.
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, U.S. coal consumption is expected to decline year over year in 2026 and 2027. 2026 U.S coal consumption is expected to drop 7.4% and 3.8% year over year in 2026 and 2027, respectively. 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.
Competition From Cleaner Energy Sources: Coal-fired power generation continues to face growing competition from lower-cost and cleaner energy sources, including natural gas, solar and wind. Abundant natural gas supplies and declining renewable energy costs have made these alternatives increasingly attractive to power producers. Utilities are steadily reshaping their generation portfolios by adding more cost-efficient and environmentally friendly resources to reduce operating costs and meet stricter emissions requirements. Meanwhile, utility-scale solar projects paired with battery storage are becoming increasingly competitive with coal on a cost basis and are capturing the majority of new power-generation capacity additions. As renewable energy adoption expands and natural gas prices remain favorable, this will result in a decline in thermal coal demand.
Zacks Industry Rank Highlights a Gloomy Industry Outlook
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 #191, which places it in the bottom 23% of 247 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 23% 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 June 2025, the coal industry’s earnings estimates for 2026 have declined 53.3% to $1.65 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 31.3% compared with the Zacks Oil-Energy sector’s rally of 28.1%. The Zacks S&P 500 composite has gained 24.3% 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 9.71X compared with the Zacks S&P 500 composite’s 18.23X and the sector’s 6.61X.
In the past five years, the coal industry has traded as high as 11.65X and as low as 1.82X, with the median being 4.34X.
Enterprise Value-to EBITDA (EV/EBITDA) Ratio vs. the S&P 500
Enterprise Value-to EBITDA (EV/EBITDA) Ratio vs. the Sector
3 Coal Stocks That Could Weather the Industry Slowdown
Core Natural Resources: Canonsburg, PA- based company, along with its subsidiaries, produces, markets and exports both metallurgical and thermal coal domestically and globally. Core Natural Resources has restarted longwall mining at its Leer South mine. The company secured major contracts across its segments at favorable prices. CNR currently has a Zacks Rank #3 (Hold).
The Zacks Consensus Estimate for its 2026 and 2027 earnings per share indicates year-over-year growth of 157.05% and 213.53%, respectively. The consensus estimate for its 2026 and 2027 sales implies year-over-year growth of 5.7% and 1.65%, respectively.
Price and Consensus: CNR
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 the mining complexes and royalty income from mineral interests it owns in different basins. The contract to acquire certain general partner and limited partner interests in AllDale Minerals III, LP and AllDale Minerals IV, LP for $206 million will boost ARLP’s royalty income.
The Zacks Consensus Estimate for its 2026 and 2027 sales has increased year-over-year by 1.62% and 3.86%, respectively. The current distribution yield is 9.9%. The firm currently has a Zacks Rank #3.
Price and Consensus: ARLP
Ramaco Resources, Inc.: Lexington, KY-based Ramaco Resources is the developer of high-quality, low-cost metallurgical coal and poised to benefit from improving metallurgical coal demand. To meet the demand, the company has restarted the Laurel Fork Mine and is expanding operations at the Berwind Mine by adding a third mining section. The company expects full-year metallurgical coal production of 3.7-4.1 million tons and total sales volumes of 4.1-4.5 million tons.
The Zacks Consensus Estimate for its 2026 and 2027 sales indicates year-over-year growth of 16.86% and 13.33%, respectively. The consensus estimate for its 2026 and 2027 earnings per share implies year-over-year growth of 72.73% and 300%, respectively. Ramaco Resources currently has a Zacks Rank #3.
Price and Consensus: METC
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This article originally published on Zacks Investment Research (zacks.com).
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