Mixed Numbers from Alliance Holdings

Alliance Holdings GP, L.P. ( AHGP - Snapshot Report ) announced fourth-quarter 2012 operating earnings of 88 cents per unit, surpassing the Zacks Consensus Estimate by 8 cents. The results of the partnership were a penny higher than the year-ago earnings of 87 cents per unit.

Alliance Holdings’ 2012 operating earnings were $3.28 per unit down by 8.3% from $3.58 per unit reported in 2011. The annual performance was lower than the Zacks Consensus Estimate of $3.41 per unit.

The year-over-year decline in earnings was due to losses and charges related to Alliance Resource Partners L.P.’s ( ARLP - Snapshot Report ) idling of the Pontiki mine, including a non-cash asset impairment of $19.0 million and a decline in shipments to the metallurgical export markets.

Total Revenue

Total revenues at the end of the fourth quarter were $549.3 million versus $474.6 million in the year-ago period, which reflects an increase of 15.7%.

Quarterly revenue was higher than the Zacks Consensus Estimate of $528 million.

The partnership generated total revenue of $2,033.9 million in 2012, 10.3% higher than $1,843.2 million reported in 2011.

Highlights of the Release

Total operating expenses of the partnership during the quarter were $443.1 million, up 14.9% from $385.4 million incurred in the year-ago period. This was primarily due to a 46.6% increase in depreciation, deletion and amortization expenses.

Despite an increase in operating expenses, operating margin in the fourth quarter expanded 60 basis points from the comparable prior-year period. The top-line improvement boosted margins in the quarter under review.

The partnership also hiked its quarterly cash distribution rate to 74 cents per unit, up 2.8% sequentially from 72 cents and higher 16.1% year over year from 63.75 cents.

Other Coal Company Releases

Peabody Energy ( BTU - Analyst Report ) reported an operating loss of $1.12 per share in the fourth quarter, coming significantly below the Zacks Consensus Estimate of earnings of 26 cents. Alliance Resource Partners, L.P. reported earnings of $1.87 per unit in the fourth quarter, surpassing the Zacks Consensus Estimate of $1.32 for the quarter.

Our View

Alliance Holdings’ only assets are its ownership interests in Alliance Resource Partners. Despite a very challenging 2012, the latter was able to secure long-term commitments to sell 31.7 million tons of coal through 2018, which will definitely be a big plus for the partnerships.

The partnership currently retains a Zacks Rank #4 (Sell). We currently have a Zacks Rank # 2 (Buy) on Natural Resource Partners LP ( NRP - Analyst Report ) , which is yet to release its fourth quarter results.

Based in Tulsa, OK, Alliance Holdings GP, L.P., produces and supplies coal to utilities and for industrial usage primarily in the U.S. The partnership has 3,832 employees and operates ten underground mining facilities.