Bear of the Day: Alpha Metallurgical Resources (AMR)

Just because you’re in a hot industry doesn’t mean your stock is a buy. And just because you used to crush earnings doesn’t mean you will continue doing so. Sometimes, the market sniffs out weakness before the numbers show up, and right now, Alpha Metallurgical Resources (AMR) is giving off that distinct whiff of vulnerability and it’s why I’m naming it today’s Bear of the Day.

AMR had its moment in the sun. As a metallurgical coal producer riding the coattails of global steel demand, it was a benefactor of the post-pandemic rebuild and the energy squeeze of 2022. But those tailwinds are no longer gusting with the same ferocity. With China’s construction boom in question, steel production leveling off, and global energy normalization underway, AMR is feeling the pressure.

The company, which operates primarily in the Appalachian region, specializes in met coal used for steelmaking, not the dirty stuff used to keep your grandma’s furnace warm. That should give it a more resilient profile, right? In theory. But Wall Street isn’t buying it anymore, and neither are analysts.

What makes AMR today’s Bear of the Day is its Zacks Rank #5 (Strong Sell). That’s the lowest rank we give, reserved for companies facing a flurry of negative earnings estimate revisions. And AMR’s revisions have been downright ugly.

Over the past 90 days, the Zacks Consensus Estimate for the current year has plummeted from $11.75 to a loss of $5.95 per share. Next year is singing a very similar tune, with estimates coming down from $41.59 to $17.65. The company has also missed three consecutive quarters of earnings. They’ve come up 70% short, 128% short, and 81% short over that period.

The bulls will point to the turnaround next year to make their case. If they can deliver, I’ll buy that story, but with three consecutive disappointments and estimates continuing to drop it feels like a risky proposition.

The Mining – Miscellaneous industry is in the Bottom 33% of our Zacks Industry Rank but there are some stocks within the industry that are in the good graces of our Zacks Rank. These include Zacks Rank #1 (Strong Buy) stocks Contango ORE (CTGO) and Materion (MTRN).

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This article originally published on Zacks Investment Research (zacks.com).

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