NACCO Industries 2025 Q2 Earnings Misses Targets as Net Income Drops 45%

NACCO Industries reported Q2 2025 results that fell short of expectations, with net income and EPS declining sharply due to operational challenges and a difficult prior-year comparison. The company guided for stronger performance in the second half of 2025, but full-year results are expected to lag due to one-time income in 2024 and a non-cash pension charge in 2025.

Revenue
NACCO Industries reported a 30.4% year-over-year increase in revenue, reaching $68.23 million in Q2 2025, driven primarily by strong performance across its Utility Coal Mining and Contract Mining segments. Utility Coal Mining contributed $28.63 million in revenue, a significant jump from the prior year, reflecting increased ton deliveries at Mississippi Lignite Mining Company. Contract Mining added $30.72 million to total revenue, supported by higher reimbursed costs and parts sales. The Minerals and Royalties segment generated $7.27 million, reflecting elevated natural gas prices and continued production. Additional revenue streams included unallocated items at $2.22 million, while eliminations reduced total revenue by $605,000.

Earnings/Net Income
NACCO Industries's net income for Q2 2025 dropped to $3.26 million, a 45.4% decline from $5.97 million in Q2 2024. Diluted EPS also fell to $0.44, representing a 45.7% year-over-year decrease from $0.81. The drop in profitability was attributed to short-term operational challenges and a weaker operating margin, despite improved revenue performance.

Price Action
The stock price of NACCO Industries fell 1.62% during the latest trading day and dropped 3.37% over the past week, with a 7.55% decline month-to-date.

Post-Earnings Price Action Review
A strategy of buying NACCO Industries shares following the revenue drop quarter-over-quarter and holding for 30 days yielded a 37.06% return, which underperformed the benchmark's 48.58%. The strategy's CAGR of 11.50% suggests moderate but steady growth, though its Sharpe ratio of 0.26 highlights a low-risk profile with limited excess returns. The maximum drawdown was reported at 0.00%, indicating no significant volatility during the holding period.

CEO Commentary
J.C. Butler, NACCO Industries President and CEO, acknowledged operational inefficiencies, temporarily unfavorable pricing, and increased costs as key contributors to the weaker results. However, he remained cautiously optimistic about the company's long-term growth potential and strategic positioning in the U.S. natural resource sector. Butler emphasized opportunities for growth driven by increasing electricity demand and favorable macroeconomic trends, despite the difficult year-over-year comparison.

Guidance
NACCO expects a meaningful increase in consolidated operating profit in the second half of 2025 compared to the first half. However, full-year results are anticipated to be lower than the prior year due to a one-time $13.6 million insurance income in Q3 2024. The company also expects a significant non-cash pension settlement charge in Q4 2025, which will negatively impact net income and EBITDA. The Utility Coal Mining segment is projected to improve in the second half, though lower contractually determined per-ton sales prices will limit growth. The Contract Mining segment is expected to benefit from operational efficiencies and increased parts sales, with continued growth anticipated into 2026.

Additional News
NACCO Industries announced a $4.2 million acquisition of mineral interests within the Midland Basin in July 2025, expanding its portfolio of oil and gas mineral and royalty assets. The acquisition included 10,500 gross acres and approximately 400 net royalty acres, with the potential for future development. The company also highlighted plans to terminate its defined benefit pension plan in Q4 2025, which is expected to result in a substantial non-cash settlement charge.

NACCO Industries also announced that its share repurchase program, with $7.8 million remaining as of June 30, 2025, will expire at the end of 2025. The company paid $1.9 million in dividends during Q2 2025, maintaining its commitment to returning value to shareholders. The board remains confident in its long-term growth strategy, emphasizing disciplined capital allocation and operational expertise to drive compounding returns.

Capital Expenditures and Outlook
The company anticipates total capital expenditures of up to $86 million in 2025, primarily directed toward future business development. NACCO expects to see a reduction in cash usage for the full year 2025 compared to 2024 as returns from prior investments begin to materialize. The company emphasized its conservative capital structure and operating discipline, which it believes will minimize risk and support long-term cash flow growth. Looking ahead, NACCO remains focused on expanding its natural resource platform and leveraging strategic opportunities for value creation.