Warrior Met Coal: Riding the Steel Wave to Recovery

Warrior Met Coal (WOR) faces a pivotal moment as it prepares to report Q2 2025 results ahead of its August 6 earnings call. The company's ability to navigate weak steelmaking coal prices, advance its Blue Creek project, and balance ESG priorities will determine its trajectory. For investors, the upcoming quarter offers a chance to assess whether the stock's valuation reflects its growth potential or overstates risks.

Blue Creek: The Growth Engine on Track

The Blue Creek project remains the linchpin of Warrior Met's strategy. With 251,000 short tons produced in Q1 2025 via continuous miner units and the longwall system on schedule for completion by mid-2026, the project is on track to add 2.5 million tons annually of high-quality metallurgical coal. This expansion not only boosts production but also diversifies sales, reducing reliance on volatile global markets.

Critically, Blue Creek's development costs remain under control, with $225–$250 million allocated for 2025. The project's low-sulfur coal aligns with global demand for cleaner steel production, a feature that strengthens its appeal to environmentally conscious buyers. Management's emphasis on “on-budget, on-schedule” execution suggests disciplined capital allocation, a rare trait in the cyclical coal sector.

Sustainability: More Than a Buzzword

Warrior Met's 2024 Sustainability Report, published in February 2025, underscores its commitment to ESG principles. Key initiatives include:
- Carbon Reduction: A 15.5% year-over-year drop in cash costs per ton to $112.35 reflects operational efficiency gains that also reduce resource waste.
- Community Investment: Programs supporting local employment and infrastructure in Alabama, where the company operates, build goodwill.
- Health and Safety: Incident rates remain low, with a focus on modern safety protocols.

The Blue Creek project itself incorporates environmental compliance measures, such as minimizing water usage and rehabilitating mined land. These efforts position Warrior Met as a responsible supplier in an industry increasingly scrutinized by investors and regulators.

Metallurgical Coal Demand Dynamics: A Turning Tide?

The Q2 results will hinge on whether steel demand—particularly from China—began to stabilize. Platts steelmaking coal prices fell 40% year-over-year in Q1, but analysts project a 32% rebound in 2026 as Chinese infrastructure spending and global industrial recovery drive demand. Warrior Met's cost discipline (cash costs now $112.35/ton vs. $133.48/ton in 2024) buffers margins in the interim.

A key risk is U.S.-China trade tensions, which could impose tariffs on exports. However, the company's guidance excludes tariff impacts, suggesting it may revise forecasts if trade barriers materialize. Investors should monitor the earnings call for updates on this front.

Valuation: A Buy at Current Levels?

Warrior Met's stock trades at $51.78, implying a forward P/E of ~11x based on 2026 EPS estimates of $5.41. Bulls argue this valuation is conservative, as it assumes Blue Creek's full production capacity and stable coal prices. A $61.83 price target (19% upside) reflects optimism about the project's completion and demand recovery.

Bearish concerns cite overvaluation risks if coal prices remain depressed or Blue Creek faces delays. A P/E contraction to 8x would push the stock to $43.28. However, the company's liquidity ($616.6 million as of Q1) and dividend (a modest $0.08/quarter but signaling financial stability) mitigate near-term distress.

Investment Thesis: Buy Ahead of the Call

Warrior Met is a high-reward, high-risk bet on the cyclical recovery of metallurgical coal. The Blue Creek project's progress, cost controls, and ESG alignment create a compelling growth narrative. While risks like trade wars and price volatility linger, the stock's current valuation leaves room for upside if Q2 results confirm execution strength and demand stability.

Recommendation: Buy Warrior Met Coal ahead of the August 6 earnings call. The Blue Creek catalyst and improving demand dynamics justify a position, especially for investors with a 12–18 month horizon. Monitor the stock closely for post-earnings reactions to coal price and tariff updates.

For conservative investors, consider a trailing stop-loss at $45 to protect gains if the recovery falters. The long-term story—Blue Creek's 2.5 million tons/year and a cleaner coal product—remains too strong to ignore.