Tulsa, OK based Alliance Resource Partners LP (ARLP) is set to report fourth quarter 2014 results before the opening bell on Jan 28. Last quarter, it posted a 6.6% positive earnings surprise. Let’s see how things are shaping up for this announcement.
Factors Influencing this Quarter
Alliance Resource Partners is a producer and supplier of steam coal to the utilities and industrial customers in the U.S.
White Oak Resources LLC’s longwall system, in which Alliance Resource has an equity interest, commenced commercial operations during the fourth quarter. Alliance Resource is committed to developing 200 million tons of coal reserves from the related Mine No. 1. The partnership believes its investment in White Oak will generate long-term cash flows.
However, the partnership’s financials maybe adversely affected if the U.S. Environmental Protection Agency’s proposal to reduce carbon emissions by 30% from the power sector by 2030 from 2005 levels gets the go-ahead.
Demand for thermal coal is expected to fall as utility operators are planning to reduce their coal-based power plants to meet environmental regulations.
Earnings Whispers?
Our proven model does not conclusively show that Alliance Resource will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -1.70%. This is because the Most Accurate Estimate is at $1.16 per share while the Zacks Consensus Estimate is at $1.18 per share.
Zacks Rank: Alliance Resource’s Zacks Rank #4 (Sell) when combined with a -1.70% ESP makes an earnings beat unlikely.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some stocks in the coal industry you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:
Arch Coal Inc. (ACI) has an earnings ESP of +7.90% and a Zacks Rank #3 (Hold).
Cloud Peak Energy Inc. (CLD) has an earnings ESP of +50.00% and a Zacks Rank #3 (Hold).
Foresight Energy LP (FELP) has an earnings ESP of +3.57% and a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment