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Alliance Resource (ARLP) Q3 Earnings: Will the Stock Beat?

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We expect Alliance Resource Partners LP (ARLP - Free Report) to beat expectations when it reports third-quarter 2016 results before the opening bell on Oct 28. Last quarter, this coal company had reported a positive surprise of 50.00%.

Why a Likely Positive Surprise?

Our proven model shows that Alliance Resource is likely to beat estimates this season because it has the right combination of two key ingredients. 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 estimates, and Alliance Resource Partners has the right mix.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +5.00%. This is because the Most Accurate estimate stands 84 cents, while the Zacks Consensus Estimate is pegged at 80 cents. This is a meaningful indicator of a likely positive earnings surprise.

Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

ALLIANCE RES Price and EPS Surprise

 

ALLIANCE RES Price and EPS Surprise | ALLIANCE RES Quote

Zacks Rank: Alliance Resource’s Zacks Rank #1, when combined with a positive ESP, makes us reasonably confident of positive surprise this quarter.

Conversely, Sell-rated stocks (#4 or #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Factor to Consider

Alliance Resource has secured coal sales agreements and is essentially sold out for 2016, thereby increasing visibility on its third-quarter top line. Further, it has realigned its productions levels based on contracted sales volumes in light of the lackluster coal market fundamentals. The company is also poised to benefit in case the market picks up.

Additionally, rising natural gas prices and above-average temperatures have resulted in depleting coal stockpiles. Weather patterns are projected to be favorable throughout 2016, with natural gas prices expected to go further up.

These factors will support a further reduction in the coal inventory and drive demand in the to-be-reported quarter, primarily in Alliance Resource Partners’ Illinois Basin and northern Appalachian markets. As a result, the company expects coal sales volumes to increase by approximately 4.5 million tons in the second half of 2016 over the first half.

Stocks to Consider

At present, Alliance Resource is the only company related to the coal industry with the right combination of elements to post an earnings beat this quarter.

Here are a few oil & energy stocks that you may consider, as our model shows that they too have the right combination of elements to post an earnings beat this quarter:

Murphy Oil Corporation (MUR - Free Report) has an Earnings ESP of +9.52% and a Zacks Rank #3. It is scheduled to report third-quarter earnings on Oct 26.

Devon Energy Corporation (DVN - Free Report) is slated to report third-quarter earnings on Nov 1.  It has an Earnings ESP of +20.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Western Refining, Inc. has an Earnings ESP of +4.88% and a Zacks Rank #3.  It is slated to report third-quarter earnings on Nov 1.

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Alliance Resource Partners, L.P. (ARLP) - free report >>

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