NRP Downgraded to Neutral - Analyst Blog
April 19 2013 - 1:40PM
Zacks
On Apr 18, 2013, we downgraded our recommendation on
Natural Resource Partners L.P. (NRP) to Neutral
from Outperform. The owner of mineral reserve properties currently
holds a Zacks Rank #3 (Hold).
Why the Downgrade?
The primary reason behind the downgrade is the effect of drab
coal industry performance in 2012 which will continue to act as a
deterrent in the first quarter of 2013.
Over the past two months the Zacks Consensus Estimate of the
partnership declined 0.5% to $1.72 per unit for 2013. Moreover, the
Zacks Consensus Estimate for 2013 reflects a projected fall of
14.25% from the year-ago earnings of $2.00 per unit.
Cause of Concern
Natural Resource Partners will be affected by lower thermal coal
prices in the U.S. energy market. Moving forward, the expiration of
a lease agreement with an associate of the partnership’s major
client Cline, Gatling LLC would impact operations.
Transporation cost is an important factor which impacts price of
coal. An increase in transportation costs owing to greater distance
between the properties and the end markets would also impact
competiveness of coal produced by lessees as oppose to ones
produced from other sources.
On a positive note, an improving steel market in the developing
nations will reinvigorate the demand for metallurgical coal. This
will to some extent counter the strong aforementioned
negatives.
Other Stocks to Consider
While we hold a modest outlook for Natural Resource Partners in
the upcoming quarters, the expected rise in natural gas prices
would reduce coal-to-gas substitution thereby enhancing coal market
dynamics.
Other stocks likely to benefit from this gradual recovery are
Consol Energy Inc. (CNX), Alpha Natural
Resources Inc. (ANR) and Alliance Resource
Partners L.P. (ARLP).
ALPHA NATRL RES (ANR): Free Stock Analysis Report
ALLIANCE RES (ARLP): Free Stock Analysis Report
CONSOL ENERGY (CNX): Free Stock Analysis Report
NATURAL RSRC LP (NRP): Free Stock Analysis Report
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