On Oct 4, 2013, we maintained our Neutral recommendation on
Natural Resource Partners L.P.
). The Houston-based mineral reserve properties owner currently
carries a Zacks Rank #3 (Hold).
Why the Reiteration?
Natural Resource Partners delivered a lackluster performance
in the last quarter due to weakness in the metallurgical (met)
coal market and lower receipts from coal royalties. The
reiteration takes into account the partnership's exposure to
price volatilities especially in a sluggish U.S. economy and
amidst pressing regulatory obligations.
However, Natural Resource Partners' focus on the development
of its low-cost and profitable mines in the Illinois basin will
lend significant stability to the future revenue stream. The
completion of the 11% purchase of interest in the reserve-rich
Bakken play from
Abraxas Petroleum Corp.
) will boost the partnership's growth trajectory.
In addition, the World Steel Association predicts a 3.2%
increase in global steel utilization in 2014 which will drive
Natural Resource Partners' met coal sales. The implementation of
longwall technology in the Illinois Basin mine will aid the
partnership in minimizing its operating cost and increase
production. We believe these strategic steps will support the
partnership to achieve its expected revenue of $330-$375 million
Furthermore, Natural Resource Partners' favorable liquidity
position will allow the partnership to maintain regular
Nevertheless, an increase in transportation cost and
dependence on a few customers might act as growth deterrents for
the partnership's business.
Other Stocks to Consider
Well-positioned Industry players at present are Zacks Ranked
SunCoke Energy Inc.
James River Coal Co.
ABRAXAS PETE/NV (AXAS): Free Stock Analysis
JAMES RIVER CL (JRCC): Free Stock Analysis
NATURAL RSRC LP (NRP): Free Stock Analysis
SUNCOKE ENERGY (SXC): Free Stock Analysis
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