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On Thursday, Benchmark analyst Nathan P. Martin maintained a Buy rating on SunCoke Energy (NYSE:SXC) shares, with the price target held constant at $13.00. The company, currently valued at $711 million market cap with a P/E ratio of 8.03, appears undervalued according to InvestingPro analysis. With a healthy dividend yield of 5.66% and strong financial metrics, SXC has demonstrated consistent profitability over the last twelve months. SunCoke Energy has announced a definitive agreement to purchase Phoenix Global, a privately-held service provider to major steel companies, for $325 million on a cash-free, debt-free basis. This acquisition price represents approximately 5.4 times the last twelve months’ (LTM) adjusted EBITDA of Phoenix Global as of March 31, 2025, which amounted to $61 million. InvestingPro data shows SunCoke’s own EBITDA stands at $261.7 million, with a robust current ratio of 2.4, indicating strong financial health to support this acquisition.
The transaction is expected to be financed through SunCoke’s available cash and a projected $230 million draw on the company’s $350 million revolving credit facility. The acquisition is slated for completion in the second half of 2025. According to Martin, SunCoke Energy’s pro-forma gross debt will remain below the company’s long-term target of 3.0 times, at 2.6 times. This prudent financial management aligns with the company’s strong free cash flow yield of 17%, as reported by InvestingPro.
The analyst also pointed out that the acquisition is predicted to be immediately accretive to SunCoke’s earnings. It is forecasted to generate annual synergies of approximately $5 million to $10 million, which have not been factored into the company’s pro-forma adjusted EBITDA projection of $279 million.
SunCoke Energy’s strategic move to acquire Phoenix Global is seen as a step towards enhancing its service offerings in the steel sector. The company’s management expects that the integration of Phoenix Global will strengthen its position and generate additional value for shareholders. The financial details reveal a carefully structured deal aimed at maintaining fiscal prudence while pursuing growth.
In other recent news, SunCoke Energy reported its first-quarter 2025 earnings, exceeding analysts’ expectations with an earnings per share (EPS) of $0.20 against the forecasted $0.17. The company generated $436 million in revenue, demonstrating strong operational performance despite challenging market conditions. Additionally, SunCoke Energy announced the acquisition of Phoenix Global for $325 million, aiming to expand its customer base and market reach. This acquisition is expected to be immediately accretive to earnings and has received board approval from both companies.
In corporate governance matters, SunCoke Energy’s stockholders voted on executive matters during the 2025 Virtual Annual Meeting, including the election of directors and the approval of executive compensation. Furthermore, the appointment of KPMG LLP as the independent registered public accounting firm was ratified. Despite positive earnings, SunCoke’s stock experienced a decline in pre-market trading, attributed to uncertainties in the steel industry. The company reaffirmed its full-year consolidated adjusted EBITDA guidance, projecting between $210 million and $225 million.
SunCoke Energy remains committed to its dividend payments and disciplined capital allocation strategy. The company also extended its Granite City coke supply agreement with U.S. Steel, reflecting its ongoing efforts to navigate market challenges.
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