Alliance Resource Partners (ARLP) – Lowering 2024 Estimates; Rating Remains an Outperform

Natural Resources
0 min read

Friday, February 23, 2024

ARLP is a diversified natural resource company that generates operating and royalty income from coal produced by its mining complexes and royalty income from mineral interests it owns in strategic oil & gas producing regions in the United States, primarily the Permian, Anadarko and Williston basins. ARLP currently produces coal from seven mining complexes its subsidiaries operate in Illinois, Indiana, Kentucky, Maryland and West Virginia. ARLP also operates a coal loading terminal on the Ohio River at Mount Vernon, Indiana. ARLP markets its coal production to major domestic and international utilities and industrial users and is currently the second largest coal producer in the eastern United States. In addition, ARLP is positioning itself as an energy provider for the future by leveraging its core technology and operating competencies to make strategic investments in the fast growing energy and infrastructure transition.

Mark Reichman, Managing Director, Equity Research Analyst, Natural Resources, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Updating our financial model. We have lowered our 2024 EBITDA and EPU estimates to $846.9 million and $3.98 from $935.9 million and $4.64, respectively. Our revisions are due mostly to changes in and our treatment of coal royalty revenue and equity method investment income. In our model, coal royalty revenues are included in other revenues. Because equity method investment income fluctuates, we decided not to include it in our forward estimates for the time being. Lastly, we updated our oil and gas price deck which reflects modestly lower forward gas prices.

A strong growth track record. In 1999, the partnership went public in an initial public offering. In 2000, ARLP generated revenue of $363.5 million, EBITDA of $71.3 million and net income of $15.6 million or $0.98 per unit. In 2023, the partnership generated revenue of $2.6 billion, EBITDA of $933.1 million and net income of $636.2 million or $4.81 per unit. While ARLP’s coal sales increased from 15.0 million tons to 34.4 million tons in the intervening years, ARLP’s revenue streams have also become more diversified.

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This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 


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