Shares of Natural Resource Partners LP have outperformed the Coal industry in the last three months. The stock has returned 18.7% compared with the industry’s gain of 1.2 %. Natural Resource Partners carries a Zacks Rank #3 (Hold).
Natural Resource Partner’s strategy of reducing debt by lowering the cash distribution strengthened its balance sheet and improved liquidity. The partnership extended debt maturities and repositioned itself for long-term growth. Interest expenses fell 8% from the year-ago level, courtesy of debt reduction.
The valuation is low-priced at the current level. The P/E (F1) is 5.68, which is undervalued when compared with the industry’s average of 9.28. Return on equity of 39.34% is higher than the industry average of 19.54%. The Earnings Estimate for 2018 and 2019 increased 12.4% and 5.8% respectively in last 60days.
To avoid large expenses and liabilities involved in coal mining business, Natural Resource Partners does not operate any of its assets. They lease them to operators for a royalty or fee, which lowers any form of risks. However, noticeable significant change in fuel-consumption patterns for electric utilities due to Clean Power Plan and stringent regulations can dampen demand and reduce production of coal.
Dependence on few customers for a major portion of royalty may affect Natural Resource Partners’ performance.
Stocks to Consider
A few better-ranked stocks in the same industry are Contura Energy, Inc. , SunCoke Energy, Inc. (SXC - Free Report) and China Coal Energy Co. . SunCoke Energy and China Coal Energy carry a Zacks Rank #2 (Buy), while Contura Energy sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Contura Energy delivered an average positive earnings surprise of 157.42% in the past four quarters. The Zacks Consensus Estimate for 2017 has moved up 19.4% in the last 60 days.
SunCoke Energy delivered an average positive earnings surprise of 130.57% in the past four quarters. The Zacks Consensus Estimate for 2018 has moved up 225% in the last 60 days.
The Zacks Consensus Estimate for 2017 has moved up 78.9% in the last 60 days for China Coal Energy. Expected EPS growth for the next five years is 3%.
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