Natural Resource Partners L.P.
(
NRP
), a master limited partnership engaged in the ownership and
management of mineral reserve properties, is slated to release its
second-quarter 2012 earnings result after the market bell on August
6, 2012.
Recap, First-Quarter 2012
Natural Resource Partners registered favorable earnings of 47 cents
per unit which surpassed the year-ago earnings as well as the Zacks
Consensus Estimate of 42 cents per unit. Although the coal market
posed challenges for the partnership, strong performance by the
lessees helped in triggering earnings growth in the first quarter.
However, this positive effect was partially offset by production
curtailments announced by the leasing companies in early 2012.
The partnership's top-line position also witnessed growth on the
back of increased met coal production in the Northern Appalachia
and the Gulf coast region, partially compensated by output lag at
the Central Appalachia play. Total revenue surged 8.0% year over
year to $91.9 million driven by rising demand for low emission met
coal. Revenue surpassed the Zacks Consensus Estimates of $89.0
million.
Guidance 2012
Natural Resource Partners expects a down drift in the US thermal
coal market, which would weaken its performance in the near term.
In addition, the rise in coal inventories, low natural gas prices
and regulatory pressures are additional factors that will affect
its growth prospects.
Positives include continual increase in met coal demand due to
production surge in the US automobile industries, diversification
and expansion of Illinois Basin, which could cushion the
partnership from the low demand conditions prevailing in the steam
coal markets.
Zacks Consensus
The Zacks Consensus Estimate for the second quarter 2012 is 42
cents per unit, down 12.5% from 48 cents reported in the comparable
quarter last year. At present, the Zacks Consensus Estimate for
earnings ranges from 41 cents per unit to 43 cents per unit.
For full-year 2012, the Zacks Consensus Estimate is $1.78 per unit,
lower than its previous year-end earnings of $1.99 per unit. The
current Zacks Consensus Estimate ranges between $1.74 per unit and
$1.82 per unit.
Estimate Revisions Trend
Agreement
We do not witness any major estimate revisions at this point. For
second quarter, 1 estimate among the 5 estimates went down in last
30 days and none moved upwards. The estimates remained unchanged in
the last 7 days.
For 2012, 1 estimate among the 5 estimates went down in last 30
days and none moved in the opposite direction. The estimates
remained unchanged in last 7 days.
Magnitude
The Zacks Consensus Estimate for the second quarter inched down by
a penny in the last 30 days. Similarly, for full-year 2012, the
consensus estimate dropped by a penny in the past 30 days. For the
past 7 days the consensus estimates remained stationary both in the
second quarter and full year 2012.
Surprise History
With respect to earnings surprises, the partnership's actual
earnings over the past four quarters widely surpassed the
corresponding Zacks Consensus Estimates.
The earnings surprise in the last four quarters ranged from 9.1% to
43.9%. The average surprise over the last four quarters remained a
positive 19.6%.
Our Recommendation
Natural Resource Partners' business is considered low-risk as it
does not operate any of the assets it owns, but rather leases them
to operators for a royalty or fee. The partnership's solid
metallurgical coal operations and acquisition of oil and gas
mineral acreage in the Mississippian Lime oil play are projected to
strengthen its profile in the utility market.
However, heavy dependence on production from its lessees makes the
partnership's operation vulnerable as the lessees have the option
to influence the production rate. The lessees' recent step to curb
output will impact the partnership's top line. Moreover, weakness
in thermal coal prices is expected to continue owing to switching
to natural gas which will pose serious challenges for Natural
Resource Partners.
Natural Resource Partners operates in a competitive US energy
market and faces stiff competitions from peers like
Peabody Energy Corp
. (
BTU
) and
Cloud Peak Energy Inc
. (
CLD
).
Currently, we are maintaining a long-term Neutral recommendation on
Natural Resource Partners. The partnership has a Zacks #4 Rank
implying a short-term Sell rating on the stock.
PEABODY ENERGY (BTU): Free Stock Analysis
Report
CLOUD PEAK EGY (CLD): Free Stock Analysis
Report
NATURAL RSRC LP (NRP): Free Stock Analysis
Report
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