U.S. natural gas prices upside likely in 2026 - Morgan Stanley
On Tuesday, Benchmark analyst Nathan Martin maintained a Buy rating on Alliance Resource Partners (NASDAQ:ARLP) with a price target of $29.00. The company, which currently maintains a "GREAT" financial health score according to InvestingPro, surpassed first-quarter expectations with an adjusted EBITDA of $160 million, outperforming Benchmark’s projection of $152 million and the consensus estimate of $150 million. The company’s trailing twelve-month EBITDA stands at $702.47 million, demonstrating consistent operational strength. The company’s Illinois Basin operations delivered robust results, compensating for the weaker performance in the Appalachia segment, which faced ongoing mining issues at Tunnel Ridge and the impact of two longwall moves.
The Illinois Basin’s success was a key factor in the quarter’s performance, as it helped to balance the challenges encountered in Appalachia. Trading with notably low price volatility (Beta: 0.62) and currently appearing undervalued according to InvestingPro’s Fair Value analysis, the stock has demonstrated resilience amid market fluctuations. Tunnel Ridge, in particular, is predicted to encounter more favorable geology following a planned longwall move in June. Alliance Resource Partners is also navigating a positive market landscape, with conditions bolstered by a cold winter, rising year-over-year natural gas prices, dwindling utility inventories, and higher forecasts for electricity demand.
Recent executive orders aimed at supporting the U.S. coal industry and coal-fired generation are expected to possibly lead to further delays in plant retirements. In this favorable environment, Alliance Resource Partners successfully secured contracts for 17.7 million tons for the years 2025 to 2028 during the quarter, bringing the company to 96% committed for 2025, even after raising sales guidance by 0.5 million tons.
While management anticipates a 4%-5% decrease in price per ton in 2026 due to the expiration of higher-priced contracts, they are hopeful that cost savings from the completion of growth projects and improved geology will offset this impact. Notably, the company maintains an attractive 10.25% dividend yield and has sustained dividend payments for 27 consecutive years. In conclusion, Benchmark’s analysis suggests that Alliance Resource Partners is in a strong position to capitalize on the growing electricity demand and may find additional growth opportunities within the coal sector and in other areas, such as the data center industry. For deeper insights into ARLP’s financial health and growth potential, including 7 additional ProTips and comprehensive valuation metrics, visit InvestingPro.
In other recent news, Alliance Resource Partners LP reported its first-quarter 2025 earnings, which did not meet analyst expectations. The company’s earnings per share (EPS) was $0.57, falling short of the projected $0.61, while revenue reached $540.5 million, missing the anticipated $579.91 million. Despite this, the company experienced a year-over-year revenue decline from $651.7 million in Q1 2024. Alliance Resource’s net income also decreased significantly to $74 million from $158.1 million in the same period last year. The company maintains strong customer relationships and secured significant coal commitments through 2028, which may have contributed to positive investor sentiment. Analysts have not reported any upgrades or downgrades for the company at this time. Alliance Resource has provided guidance for 2025, expecting sales volumes between 32.75 million and 34.75 million tons and projecting capital expenditures ranging from $285 million to $320 million. The company remains focused on cost management and leveraging its domestic market position.
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