Warrior Met Coal's Ballooning Development Costs Prompt Analysts To Rethink Projections
Portfolio Pulse from Matt Whittaker
RBC Capital analysts lowered their price target for Warrior Met Coal (NYSE:HCC) from $74 to $64 due to increased development costs at the Blue Creek mine, which were significantly higher than expected. The company plans to spend $335 million to $390 million this year on the mine and other expenditures, a 32% increase over RBC's forecast and 24% above consensus. Despite these higher costs, Warrior Met Coal's Q4 net income rose, supported by higher production, sales, and prices for steelmaking coal. The Blue Creek mine, set to begin operations in 2026, is one of the largest untouched metallurgical coal reserves in North America.
February 23, 2024 | 10:17 pm
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NEUTRAL IMPACT
RBC Capital lowered the price target for Warrior Met Coal from $74 to $64 due to unexpected high development costs at the Blue Creek mine, but maintained a Sector Perform rating. Despite increased expenses, the company's Q4 net income increased, supported by higher coal sales and prices.
The lowered price target by RBC Capital due to higher than expected development costs at the Blue Creek mine could create some negative sentiment among investors. However, the company's ability to increase its Q4 net income despite these higher costs, along with the maintained Sector Perform rating, suggests a neutral short-term impact on HCC's stock price.
CONFIDENCE 85
IMPORTANCE 90
RELEVANCE 100
POSITIVE IMPACT
BHP Group Ltd. experienced a mining suspension after a fatality, contributing to higher metallurgical coal prices due to lower supply. This situation indirectly benefits Warrior Met Coal by increasing demand and prices for its steelmaking coal.
The mining suspension at a BHP Group Ltd. mine has contributed to a decrease in the supply of metallurgical coal, leading to higher prices. This situation indirectly benefits Warrior Met Coal by increasing the demand and prices for its steelmaking coal, potentially having a positive short-term impact on HCC's stock price.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 50