On Tuesday, Benchmark updated its outlook on Alliance Resource Partners (NASDAQ:ARLP) shares, increasing the price target to $26 from $25 while maintaining a Buy rating.
The adjustment follows Alliance Resource Partners' second quarter report, which showed adjusted EBITDA of $181 million, falling short of the anticipated $212 million consensus and the $216 million estimated by analysts.
The company's sales were affected by approximately 0.5 million tons due to logistical challenges, including high water levels on the Ohio River and a disruption at the Baltimore port. However, the firm has confirmed that these issues have been resolved, and the delayed shipments are expected to be completed in the second half of the year.
Alliance Resource Partners has decided to reduce production in the latter half of the year in response to less favorable netback pricing. This strategic move aims to bring inventory levels back to normal. Consequently, the full-year sales guidance has been revised downward. Despite this, management is optimistic about potential spot sales opportunities in the fourth quarter in both export and domestic markets.
Additionally, the company has updated its forecasts, with both expense per ton and price per ton expected to rise. Looking beyond the immediate future, Alliance Resource Partners intends to expand beyond its primary coal segment.
Nevertheless, with increasing domestic power demand, the company anticipates returning to a coal sales rate of 3 million tons per month in the following year. The analyst reaffirmed the Buy rating and raised the target price, reflecting confidence in the company's long-term growth strategy.
In other recent news, Alliance Resource Partners, a diversified energy company, has announced the pricing of a $400 million private placement of senior unsecured notes due in 2029. The 8.625% notes will be issued at par and are expected to close later this year.
The company plans to use the proceeds from this offering to partially redeem its 7.5% Senior Notes due in 2025, with the remaining balance allocated for general corporate purposes. The redemption of the 2025 Notes is contingent upon the successful completion of the new offering.
These new notes will not be registered under the Securities Act of 1933 or any state securities laws, and therefore, will be available only to qualified institutional buyers and certain non-U.S. persons in offshore transactions. They will not be listed on any securities exchange. It's worth noting that this announcement does not constitute an offer to sell or a solicitation of an offer to buy the new notes.
In line with recent developments, Alliance Resource Partners continues to emphasize its evolution and positioning as a reliable energy partner, aiming to support the advancement of energy and related infrastructure as part of its business strategy.
InvestingPro Insights
Following Benchmark's updated outlook on Alliance Resource Partners, it's worth noting some key InvestingPro metrics and tips that may interest investors. Alliance Resource Partners has a market capitalization of approximately $3.16 billion, with a notably low P/E ratio of 6.46, indicating that the stock could be undervalued relative to earnings. Additionally, the company's dividend yield stands at a robust 11.36%, showcasing its commitment to returning value to shareholders.
In line with the company's strategic decisions and market performance, InvestingPro Tips suggest that Alliance Resource Partners pays a significant dividend to shareholders and has maintained these payments for 26 consecutive years. The stock also trades with low price volatility, which might appeal to investors seeking stability. For those interested in deeper analysis, there are 9 additional InvestingPro Tips available, which could provide further insights into the company's financial health and market performance.
Investors can explore these tips and more by visiting https://www.investing.com/pro/ARLP and may benefit from using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. With Alliance Resource Partners operating with a moderate level of debt and having liquid assets that exceed short-term obligations, the company's financial position appears to be solid, aligning with the optimistic outlook presented by Benchmark.
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