Why is the Whitehaven Coal share price leaping 7% to a record high?

The Whitehaven Coal Ltd (ASX: WHC) share price is moving into uncharted territory on Friday.

While the company hasn’t released any price-sensitive announcements since its June quarterly report last month, investors remain buoyant.

The coal producer’s shares kicked off the day’s trading at $7.13 apiece and haven’t looked back. They soared 7.6% to an all-time high of $7.46 and, at the time of writing, are still flying high, up 6.64% at $7.39.

It surpasses the company’s previous peak of $7.35 that it reached in 2011.

Let’s take a look at what’s behind this latest ascent.

Whitehaven Coal steams ahead

Investors are bidding up the company’s shares as coal prices continue to elevate, nearing its record highs attained in early March 2022.

According to Trading Economics, Newcastle coal futures are fetching at US$413 a tonne.

China recently announced it is boosting domestic coal production as it grapples with power shortages following severe heat waves. This has led investors to close on long positions for the commodity as increased supplies will hit the market.

Nonetheless, coal prices are expected to remain higher due to persistent supply disruptions caused by the Russian war in Ukraine.

Also providing support is the recent IEA report which anticipates that global coal demand will return to its all-time high this year. This is being driven by higher natural gas prices, which have intensified gas-to-coal switching in many countries.

While it has been a terrific year for coal producers, Whitehaven Coal is projecting it will achieve its strongest ever full-year result.

Earnings before interest, tax, depreciation and amortisation (EBITDA) for FY 2022 is forecast to reach $3 billion. In FY 2021, Whitehaven Coal recorded an EBITDA of $204.5 million, down 33% over the prior corresponding period (FY20).

You may want to keep an eye out on 25 August as the company is scheduled to release its results.

Whitehaven share price snapshot

As coal prices surge to near record highs, the Whitehaven share price has leapt by more than 180% in 2022.

In comparison, the S&P/ASX 200 Energy Index (ASX: XEJ) has lifted by 35% over the period.

According to ANZ Share Investing, Shaw & Partners raised its 12-month price target by 20% to $7.50 per share. Based on where Whitehaven Coal trades today, this is almost in line with the market price.

Whitehaven commands a market capitalisation of approximately $5.80 billion.

The post Why is the Whitehaven Coal share price leaping 7% to a record high? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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