Alpha Metallurgical Resources, Inc. (AMR) processes and sells metallurgical (met) coal and thermal coal in Virginia and West Virginia. Despite pandemic-induced bottlenecks in coal supply, AMR's efforts to deploy resources for initiatives to diversify its product offerings, as well as its long-standing contractual relationships, have helped the stock surge 140.5% year to date and 510.2% over the past year to close its last trading session at $146.82.
The company made a voluntary payback of $99.4 million on its term loan on June 3, 2022, which eliminated all remaining principal and paid the debt in full.
AMR's chair and chief executive officer, David Stetson, stated, "As we have mentioned consistently over the past few quarterly calls, this is a critically important milestone for our company and a significant step in further strengthening Alpha's balance sheet. In just under a year's time, more than $550 million has been paid toward eliminating Alpha's long-term debt load, which allowed us to extinguish the term loan and its carrying costs two years ahead of maturity."
In addition, AMR's board of directors authorized a $600 million share repurchase program. As of June 3, the corporation has purchased 860,934 shares of common stock for $126.3 million.
Here's what could shape AMR's performance in the near term:
Robust Financials
During the first quarter ended March 31, 2022, AMR's total revenue increased 177.5% year-over-year to $1.07 billion. Its operating income came in at $453.09 million, compared to an operating loss of $16.50 million. The company reported a net income of $400.89 million, compared to a net loss of $32.93 million in the prior-year period. Its EPS amounted to $20.52.
Strong Profitability
AMR's trailing-12-month EBIT margin of 29.1% is 104.1% higher than the industry average of 14.3%. Also, its ROC, net income margin and ROA are 650.5%, 178.5%, and 550.1% higher than their respective industry averages. Furthermore, its asset turnover ratio of 1.6% is 120.3% higher than the industry average of 0.71%.
Impressive Growth Prospects
Street expects AMR's revenues and EPS to rise 96.5% and 549.3% year-over-year to $4.44 billion and $99.34, respectively, in fiscal 2022. In addition, AMR's EPS is expected to rise 3090.3% in the current quarter. Moreover, the company has an impressive earnings surprise history, as it topped Street EPS estimates in three of the trailing four quarters.
Discounted Valuation
In terms of trailing12-month Price/Cash Flow, the stock is currently trading at 5.11x, 39.4% lower than the industry average of 8.42x. Also, its forward EV/EBIT of 1.33x is 85.2% lower than the industry average of 8.96x. Moreover, AMR's forward Price/Sales of 0.61x is 44.8% lower than the industry average of 1.10x.
Consensus Rating and Price Target Indicate Potential Upside
Each of the two Wall Street analysts that rated AMR rated it Buy. The 12-month median price target of $198.50 indicates a 35.2% potential upside. The price targets range from a low of $182.00 to a high of $215.00.
POWR Ratings Reflect Solid Prospects
AMR has an overall grade of A, equating to a Strong Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. AMR has an A grade for Growth and a B for Quality and Value.
Its solid earnings and revenue growth potential justify the Growth grade. AMR's strong profitability is consistent with the Quality grade. In addition, the stock's lower-than-industry valuations are in sync with the Value grade.
Of the 11 stocks in the A-rated Coal industry, AMR is ranked #3.
Beyond what I stated above, we have graded AMR for Sentiment, Stability, and Momentum. Get all AMR ratings here.
Bottom Line
The company reported impressive revenue and earnings growth in the last reported quarter. In addition, considering AMR’s higher profitability, attractive valuation, and significant progress in deleveraging its balance sheet, the stock is poised to soar in the near term. So, we believe the stock could be a great buy now.
How Does Alpha Metallurgical Resources Inc. (AMR) Stack Up Against its Peers?
AMR has an overall POWR Rating of A, which equates to a Strong Buy rating. Check out these other stocks within the same industry with A (Strong Buy) ratings: China Shenhua Energy Company Limited (CSUAY) and SunCoke Energy Inc. (SXC).
AMR shares were unchanged in premarket trading Thursday. Year-to-date, AMR has gained 141.11%, versus a -14.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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