On Jan 25, 2013, we have upgraded our recommendation to
Outperform from Neutral on
Natural Resource Partners L.P.
). Currently, the partnership carries a Zacks Rank #2 (Buy).
Why the Upgrade?
Natural Resource's string of unconventional asset acquisitions
led us to move up our long-term expectation. The partnership's
purchase of frac sand reserves is expected to quicken the pace of
oil and gas production in the near term. Meanwhile, Natural
Resource also picked up an overriding interest in the
liquids-rich portion of Marcellus Shale.
We believe these initiatives will drive growth given the
increasing preference for natural gas and liquids as an energy
source in the U.S.
Natural Resource's earnings of 48 cents per unit for the third
quarter 2012 widely beat our estimate of 42 cents per unit.
Revenue followed the same path and stood at $94.2 million beating
our expectation by 9.5%. Earnings surprises generally drive
positive estimate revisions.
Recently, the partnership was engaged in another key stake
buyout in the Trona ore mining play that could prove profitable
in the future. Natural Resource's offering of a consistent
quarterly distribution rate of 55 cents per unit and a five-year
yield of 5.38% also look encouraging.
Furthermore, the International Energy Agency (IEA) expects the
coal market to make a comeback which will complement the
partnership's strategic purchase of the low-cost Deer Run coal
Moreover, visible growth signs in the premier market of China
will open up a window of coal export opportunities for the
partnership with volumes produced in the country failing to meet
their domestic demand.
Other Stocks to Consider
Besides Natural Resource Partners, other companies in the
energy market domain who are performing well and currently
maintain a Zacks Rank #1 (Strong Buy) are
Integrys Energy Group Inc.
Wisconsin Energy Corp.
AMEREN CORP (AEE): Free Stock Analysis Report
NATURAL RSRC LP (NRP): Free Stock Analysis
INTEGRYS ENERGY (TEG): Free Stock Analysis
WISC ENERGY CP (WEC): Free Stock Analysis
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