Alliance Resource Partners, L.P.’s (ARLP) fourth-quarter 2014 earnings of $1.18 per unit lagged the Zacks Consensus Estimate of $1.19 by a penny. Quarterly earnings, however, escalated 26.9% year over year.
2014 adjusted earnings were $4.77 per unit, lower than our consensus of $4.80. Earnings for 2014 increased 31.4% from $3.63 per unit in 2013.
The year-over-year upside was primarily due to higher sales volume and price realization for coal tons sold.
Total Revenue
Alliance Resource’s revenues of $590.8 million in the fourth quarter surpassed the Zacks Consensus Estimate of $588 million and increased 4.3% over the prior-year quarter.
Total revenues at the end of 2014 were $2,300.7 million, higher than the Zacks Consensus Estimate of $2,298 million. Yearly revenues also increased 4.3% from $2,205.6 million in 2013.
Highlights of the Release
Total operating expenses of the partnership during the quarter were $456.6 million, up 1.7% from $449.1 million incurred in the year-ago period. The increase in total operating expenses was primarily dueto higher general and administrative expenses as well as depreciation and amortization expenses.
Alliance Resource Partners registered a 14.8% year-over-year increase in production volume in the reported quarter to 10.5 million tons. The solid performance at the Tunnel Ridge, MC Mining and Dotiki mines and production initiation at Gibson South mine in Apr 2014 boosted production.
The partnership also hiked its quarterly cash distribution to 65 cents per unit, up 2% sequentially from 63.75 cents per unit and up 8.6% year over year from 59.875 cents per unit.
Guidance
In, 2015 Alliance Resource expects revenues in the range of $2.39 billion–$2.48 billion. The guidance excludes transportation revenues.
Due to tepid demand in the U.S. thermal coal market, Alliance Resource expects an under utilization of its capacity by 4 million tons in 2015.
Coal production volume for 2015 is projected in a range of 40.4–42.5 million tons and sales volumes are estimated in a band of 41.4–43.5 million tons.
EBITDA is expected to range between $765 million and $825 million and net income is expected to come in the band of $395 million to $455 million in 2015.
The partnership expects to make capital investment in the range of $300 million to $330 million in 2015. These expenses will be directed towards mine expansion, infrastructure projects and purchase of coal reserves.
Upcoming Peer Releases
SunCoke Energy Inc. (SXC) is slated to release fourth-quarter and 2014 earnings results on Jan 29, before the market opens. The Zacks Consensus Estimate for the quarter is pegged at 26 cents.
CONSOL Energy Inc. (CNX) will announce fourth-quarter and 2014 earnings before the opening bell on Jan 30. The Zacks Consensus Estimate for the quarter is currently at 20 cents.
Arch Coal Inc. (ACI) is set to release fourth-quarter and 2014 earnings before the opening bell on Feb 3. The Zacks Consensus Estimate for the quarter is at a loss of 38 cents.
Our View
Alliance Resource Partners’ earnings in the reported quarter and 2014 were lower than our expectations. However, the partnership’s revenue beat our estimates and increased year over year on account of higher tons sold and better price realized.
Alliance Resource acquired the rights of approximately 452.2 million tons of Illinois Basin coal reserves. This increases the partnership’s total coal reserves to roughly 1.6 billion tons.
This should ensure a steady revenue stream going forward.
Having said that, if the weakness in thermal coal market persists, it will likely have a negative impact on revenues going forward.
Alliance Resource Partners currently holds 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