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ARLP Ranks Sixth in Upside Potential among MLPs

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Dec. 11 2017, Updated 9:03 a.m. ET

Recent market performance

Alliance Resource Partners (ARLP), an MLP involved in coal mining and production, has been very weak in its recent trading sessions. It recently saw a new 52-week low of $17.70. Overall, it has lost 28.6% since the beginning of this year. 

ARLP’s peers CNX Coal Resources (CNXC), Natural Resource Partners (NRP), and Foresight Energy Partners (FELP) have lost 17.2%, 20.4%, and 34.3% year-to-date (or YTD), respectively. This indicates a general negative sentiment in the coal sector. 

For a recent update on US coal indicators, please read Coal Indicators: Updates You Should Know.

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Valuation analysis

Alliance Resource Partners (ARLP) was trading at a distribution yield of 11.4% on December 6, 2017. This is higher than the one-year and five-year averages of 8.8% and 8.9%, respectively. 

However, the partnership’s forward EV-to-EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] multiple of 4.8x is above the five-year average of 4.0x.

Analyst recommendations

Alliance Resource Partners ranks sixth in terms of upside potential among its peer MLPs. ARLP is currently trading below the low range ($20.00) of analysts’ target price. ARLP’s average target price of $24.40 implies an ~38.0% upside potential from the current price levels. 

Alliance Resource Partners has not seen any rating changes in 2017 so far. Plus, 60.0% of the analysts surveyed by Reuters rated ARLP as “buy” on December 6, 2017, while the remaining 40.0% rated it as a “hold.”

In the next article, we’ll look into the upside potential for Boardwalk Pipeline Partners (BWP).

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