The Whitehaven Coal Ltd (ASX: WHC) share price is tracking lower on Friday and is now 7% in the red at $7.17 apiece.
Whilst the company has not released anything price-sensitive today, it did post its FY24 results on Thursday, and two leading brokers have slashed their estimates on the company.
Let's see what the brokers said.
Broker downgrades Whitehaven share price
Following the coal giant's FY24 numbers, investment bank Barrenjoey has cut its rating on the Whitehaven share price from a buy to a hold, according to The Australian.
Analyst Glyn Lawcock notes that, despite a stronger-than-expected final dividend, Whitehaven is trading at around four times its FY25 EV/EBITDA, aligning closely with its net present value (NPV).
In other words, the stock looks fairly valued, according to Lawcock.
The analyst highlighted Whisehaven's sale of 30% of the Blackwater mine for $US1.08 billion as a notable event.
However, he also expressed concerns about the company's FY25 guidance, which revealed lower volumes and higher unit costs.
These factors led to a steep cut in FY25 earnings expectations, which, Lawcock says, could prompt further downward revisions in consensus estimates.
Goldman Sachs joins the cutting party
Goldman Sachs has also revised its outlook on the Whitehaven share price in a note today.
The broker revised its FY25 earnings forecasts lower by 41% and its FY26 estimates by 57%. Ouch.
It cites higher costs, lower volumes and rising net interest expenses as the primary reasons for these cuts.
Goldman consequently lowered its price target on Whitehaven shares by 13%, now valuing the business at $6.80 per share.
It maintains a hold rating on Whitehaven, noting that the stock is currently trading at about 1.2 times its net asset value (NAV).
Meanwhile, it also updated its outlook on the coal market. It notably sees a metallurgical coal price of US$220 per tonne "over the medium term". This is driven by "ongoing supply tightness in Canada", along with demand from India and China.
Marginal costs to produce thermal coal are estimated to fall to US$100 per tonne.
We adjust our FY25/26/27 EPS by -41%/-57%/-57% on higher costs, lower volumes, increase in D&A, net interest expense and other costs. Our NAV is down 7% to A$6.9/sh (from A$7.4/sh). Our 12m PT is down 13% to A$6.8/sh (from A$7.1/sh).
Thermal Coal market to soften further in 2024: our global commodity team forecasts a ~40Mt surplus for 2024 due to decreasing global import demand, largely driven by lower Chinese demand (-80Mt) and high inventory levels, and growing export capacity (+47Mt) from Indonesia, Australia and Russia, and expect marginal costs to fall to US$100/t in 2024. We forecast ~US$120/t for 6000kcal NEWC benchmark in 2024.
Coupled with negative free cash flow projected for FY25 and FY26, it says this could hamper Whitehaven shares.
Foolish takeaway
The Whitehaven share price is in the red today despite no market-sensitive updates. However, brokers have lowered their estimates on the company, and the market is still digesting its FY24 earnings result.
In the last 12 months, the stock is up 4%.
