NC - NACCO Industries: Generously Priced

2025-05-11 03:00:50 ET

Summary

• NACCO Industries' optimal investment period was during its cyclical losses. That period has now passed.
• Coal's future in North America is limited due to the superior economics of natural gas.
• NACCO reported an improved first quarter, but core operations posted a loss.
• As the cyclical recovery continues, the downside risk increases with the stock price.
• In North America, natural gas is "widely" assumed to have better long-term characteristics compared to coal. The possibilities for coal are generally considered to be the export market.

Generally, the time to consider purchasing a company like NACCO Industries ( NC ) is when the company is cyclically reporting losses and one can determine that the company will strongly participate in the coming business recovery. Clearly that time has passed. Coal is an industry that likely has a bright export future, provided the current political uncertainty does not end up ruining that future. But the future in North America is likely limited by the generally superior economics of natural gas. Since commodities' prices fluctuate and relationships can change, it is possible for a different outlook down the road. But for the time being, the coal outlook in North America itself is not one of growth.

Earnings

NACCO reported an improved first quarter over the previous fiscal year. However, the company operations themselves reported a loss....

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