Alliance Resource Partners (ARLP): Evaluating Valuation After Q2 Earnings Miss and Dividend Cut

Alliance Resource Partners (ARLP) just delivered its second-quarter financial results, and the outcome has certainly stirred up debate among investors. The numbers fell short of what the market had hoped for, and on top of that, management made the decision to reduce the dividend to $0.60 per share from $0.70 last quarter. While a lower dividend often hints at management taking a cautious stance, it can also prompt shareholders to double-check their expectations about where the business is headed from here.

It has been an eventful year for Alliance Resource Partners, with the latest earnings miss and dividend cut highlighting a period of volatility. Despite these recent setbacks, the stock is still up 11% over the past year, showing resilience compared to its roughly 14% year-to-date drop. Looking further back, the three- and five-year returns are even stronger, suggesting that long-term momentum, although dulled in the short run, has not been erased entirely.

With the stock’s latest move lower and management sending out more cautious signals, investors may be considering whether the market is presenting a genuine buying opportunity or whether expectations for subdued growth are already reflected in the current price.

Most Popular Narrative: 25% Undervalued

The prevailing narrative considers Alliance Resource Partners to be trading around 25% below fair value, driven by a complex blend of industry tailwinds, steady demand, and operational improvements.

Recent legislative and administrative shifts in U.S. energy policy, such as regulatory reprieves for coal plants, the phasing out of renewable tax credits in favor of baseload power, and direct financial incentives to keep fossil fuel plants operational, have created one of the most favorable regulatory environments for coal in decades. These tailwinds should support stable or potentially higher future coal sales volumes and improve longer-term revenue visibility for Alliance Resource Partners.

Wondering what underlies this bold 25% undervaluation call? The story is not just about optimism; it is about specific growth, margin, and profitability assumptions colliding with one of the most contentious policy backdrops in years. Shocked by the company’s recent move? You might be even more surprised by the model that values it well above today’s market price. Read on to uncover what is fueling this forecasted upside and where the narrative expects performance to advance next.

Result: Fair Value of $30.5 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent declines in coal pricing and sudden shifts in U.S. energy policy could quickly undermine the bullish case for Alliance Resource Partners.

Find out about the key risks to this Alliance Resource Partners narrative.

Another View: What Does Our DCF Model Say?

While analyst forecasts point to upside, our SWS DCF model delivers an even stronger endorsement by finding the shares deeply undervalued based on projected cash flows. Could these markedly different methods agree on the same opportunity, or might they miss something the other catches?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Alliance Resource Partners for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Alliance Resource Partners Narrative

If you would rather draw your own conclusions or have a different perspective on Alliance Resource Partners, you can assemble your own narrative in just a few minutes by using Do it your way.

A great starting point for your Alliance Resource Partners research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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