SunCoke Energy (SXC), a specialist in high-quality coke production predominantly for the steel and foundry industries, reported 2024 earnings that exceeded market expectations. These results come despite a decline in revenue due to lower coal costs and alongside a record safety performance. However, SunCoke’s logistics segment was one bright spot, which showed promising new business and pricing adjustments, supplemented by a one-time gain from removing legacy liabilities.
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Looking into 2025, the company anticipates a tougher market and lower margins on coke sales but maintains confidence in its strong balance sheet and capital allocation strategies. Wall Street analysts agree, making SXC an intriguing play in the steel industry.
A Leading Coking Coal Producer
SunCoke Energy, Inc. is an independent producer of high-grade coke in the Americas. It operates facilities in the U.S. and Brazil and provides coke (the fuel used in the steelmaking process, created by heating coal without oxygen) to both domestic and international clients.
Most of its sales are secured under long-standing, take-or-pay contracts. SunCoke also exports high-quality coke to customers abroad. Alongside its primary operations, it runs a logistics business that extends material handling services to coke, coal, steel, power, and other bulk customers. Its logistics terminals can mix and transload over 40 million tons of material annually and are suitably located to access the Gulf Coast, East Coast, Great Lakes, and international ports.
Recently, SXC progressed in growing its logistics business with a new coal handling agreement at Kanawha River Terminal and an extension of the coal handling agreement at Convent Marine Terminal.
Better-than-anticipated Earnings
SunCoke reported a net income of $23.7 million for the fourth quarter, or $0.28 per diluted share. At the same time, for 2024, it produced $95.9 million in net income, or $1.12 per diluted share, beating consensus expectations. Revenue decreased during the fourth quarter and the entire year of 2024, primarily due to the pass-through of lower coal costs in the domestic coke segment.
The consolidated Adjusted EBITDA for the fourth quarter and full year stood at $66.1 million and $272.8 million, respectively. Operating cash flow for the year was $168.8 million.
For 2025, SXC expects its consolidated Adjusted EBITDA to be between $210 million and $225 million. Due to challenging market conditions, it anticipates lower margins on higher spot coke sales.
Trading at a Value
The decline in revenue and softer forward guidance have helped to drive the share price down over 14% for the past year. It trades in the lower half of its 52-week price range of $7.47 – $12.82, demonstrating negative price momentum as it trades below the major moving averages. The slide in price has its P/S ratio at 0.41x, a considerable discount to the Materials sector average of 1.28x.
Wall Street follows the company thinly. However, Benchmark Co. analyst Nathan Martin, a five-star analyst according to Tipranks’ ratings, recently reiterated a Buy rating on SunCoke shares with a price target of $13.00, noting the company’s potential for growth despite anticipated challenges. The company’s robust financial position, improved liquidity, and manageable leverage position it well for future developments.
Based on his recent recommendation, SunCoke is rated a Moderate Buy. The 12-month price target for SXC stock is $13, which represents a 38.45% potential upside from current levels.
SXC Stock in Summary
SunCoke wrapped up 2024 with robust earnings that outpaced market projections despite declining revenue due to plummeting coal costs. The strides made in its logistics division, supported by new business, revised pricing, and the elimination of long-standing liabilities, bode well for future growth. The company anticipates navigating a challenging market with potentially lower margins from coke sales in 2025. Yet, its solid financial foundation and capital allocation strategies continue to inspire confidence, a sentiment echoed by Wall Street analysts.
Despite the anticipated hurdles, SunCoke’s prospects remain intriguing, though investors may want to wait for the negative price momentum to turn positive before entering a position.
