Alliance Resource Partners: Long-Term Potential Outweighs Short-Term Pressure – Quarterly Update Report
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By Rayk Riechmann
At the end of the day, pressure is what turns a chunk of coal into a diamond.
That’s how savvy investors might look at Alliance Resource Partners, L.P. (NasdaqGS: ARLP) which reported second quarter results this week with good and bad takeaways but positive guidance for 2025.
Lower average coal sales prices resulted in top-line pressure, with sales growth falling short of expectations. Net income declined from $100.2 million in the prior year quarter to $59.4 million. Meanwhile, free cash flow generation remained strong at $79 million even after investing $65.3 million in coal operations. Additionally, ARLP’s balance sheet continues to impress with total liquidity of $499.2 million and the clear ability to fund future growth.
Management announced the well-timed dividend rightsizing with lowered quarterly cash distributions of $0.60 per unit. This effort should not be perceived as bad news: It offers greater financial flexibility to allocate an additional $50 million in annualized cash savings towards high-return investments. Thanks to the new Big Beautiful Bill Act, these payouts are expected to be higher for most investors under the new tax regime.
Supported by favorable U.S. policy changes, the coal industry is expecting a demand revival and reversal in coal plant retirement trends further feeding into our bullish long-term perspective. With industry tailwinds set in motion, ARLP’s upside potential lays in an earnings recovery based on strong execution and favorable pricing environment.
Click the link below to read our complete earnings report and find out if ARLP is an equity diamond waiting to be discovered.
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