We reiterate our Neutral recommendation on pure coal play,
Natural Resource Partners L.P.
). The partnership continued to have a good run with strong
financial outcomes in the third quarter of 2012. Natural
Resources' top and bottom line comfortably surpassed the Zacks
With coal gradually losing the race to other eco-friendly
energy sources, we believe the partnership's acquisition of frac
sand reserves in Wisconsin will help to accelerate near-term oil
and natural gas production volumes.
The buyout of an overriding stake in the liquids-rich portion
of the Marcellus Shale formation is another key strategic move
that will sit well with the partnership's targeted growth
However, the aforementioned positive triggers will face
generic risks like price volatilities, especially in a laggard
U.S. economy and pressing regulatory hurdles.
Looking forward, the steady rebound in the Chinese and South
Korean markets could offer encouraging prospects to the
partnership in the long run. Nevertheless, increasing coal
stockpiles from the Central Appalachia operation could somewhat
temper results in the upcoming quarters.
Taking into account these broad fundamentals, Natural
Resources currently has a short-term Zacks #3 Rank (Hold). The
Zacks Consensus Estimates for the fourth quarter and full year
2012 presently stand at 43 cents per unit and $1.84 per unit,
Another coal major,
Arch Coal Inc.
) is also strapping up its business to combat the soft
macro-environment with the development of the high-quality Leer
Mine. In addition, the company plans to fortify its foothold in
the Asia-Pacific markets and has locked in several deals on
Powder River Basin ("PRB") coal with Korea's power generating
The Houston, Texas based partnership is primarily engaged in
the business of owning and managing mineral reserve properties.
The partnership owns coal reserves and coal handling and
transportation infrastructure in the three major coal producing
regions of the United States -Appalachia, the Illinois Basin, and
the Northern Powder River Basin ("NPRB").
ARCH COAL INC (ACI): Free Stock Analysis
NATURAL RSRC LP (NRP): Free Stock Analysis
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