We recently issued an updated research report on Natural Resource Partners LP (NRP - Free Report) . The partnership delivered fourth-quarter 2018 adjusted earnings of $1.69 per unit, which beat the Zacks Consensus Estimate of $1.22 by 38.52%.
Improving royalty income, debt reduction and new initiatives from the administration to drive coal demand have been boosting the prospect of the partnership. However, challenges remain in the form of gradual changes in fuel-consumption patterns and rising competition in the coal space .
What’s Driving the Stock?
Amid difficult coal market fundamentals, Natural Resource Partners is working on a strategic plan to strengthen balance sheet and improve liquidity. As of Dec 31, 2018, long-term debt was $557.6 million, down from $729.6 million at the end of 2017. Also, the partnership extended debt maturities and repositioned itself for long-term growth. Courtesy of debt reduction, its interest expenses in 2018 were $70.2 million. The figure was down 14.4% from the year-ago level of $82 million. Also, the partnerships’ decision to sell Construction Aggregates has helped it lower debt burden. The company’s focus to reduce debt and increase liquidity position will strengthen its financial position.
The partnership is expected to benefit from recent improvements in metallurgical coal markets. It continues to gain from higher metallurgical coal prices. Natural Resource partners derived nearly 65% of coal royalty revenues and approximately 55% of coal royalty production during the year on benefits from higher metallurgical coal prices.
Even without the Clean Power Plan and Paris Climate agreement, there is a notable change in the fuel-consumption patterns of the electric utilities due to stringent regulation. This is likely to further lower demand for coal from the present level. These developments might force the partnership’s lessees to trim production, resulting in drop-in royalty revenues.
Zacks Rank & Stocks to Consider
Natural Resource Partners currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the same sector are Enphase Energy, Inc (ENPH - Free Report) , SunCoke Energy, Inc (SXC - Free Report) and Sunworks, Inc. (SUNW - Free Report) .
While Sunworks sports a Zacks Rank #1 (Strong Buy), Enphase Energy and SunCoke Energy carry a Zacks Rank #2 (Buy). You can see the complete .list of today’s Zacks #1 Rank stocks here.
Enphase Energy came up with an average positive earnings surprise of 33.34% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has moved up 36.6% to 41 cents in the past 60 days.
SunCoke Energy pulled off an average positive earnings surprise of 285.83% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has rallied 59% to 70 cents in the past 60 days.
Sunworks delivered an average positive earnings surprise of 7.50% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has surged 100% to 6 cents in the past 60 days.
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