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Will Cheap Coal Hurt Natural Resource's (NRP) Q4 Earnings?

Natural Resource Partners L.P.NRP is expected to release fourth-quarter 2015 financial results on Feb 11, 2016. In the previous quarter, the partnership reported a positive earnings surprise of 76.92%. On an average, the partnership has posted a 22.57% positive earnings surprise in the last four quarters. Let's see how things are turning out for the upcoming quarter.

Factors at Play

Coal is being increasingly replaced by natural gas for power production in the light of regulatory pressure and cheaper cost. This will adversely impact the partnership's royalty revenue from its thermal coal assets. Further, the downward spiral in coal prices is likely to depress the margins of Natural Resource's lessees in the fourth quarter, so much so they might find it difficult to pay the royalty to the partnership.

However, Natural Resource Partners is taking cost-cutting measures by closing offices and reducing headcount in a bid to improve margins and financial flexibility. Financial flexibility will help the partnership to navigate through difficult market conditions.

Additionally, improving fundamentals in the aggregates market are expected to boost Natural Resource Partners' performance.

Earnings Whispers

Our proven model does not conclusively show that Natural Resource Partners is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: The ESP for the stock is currently 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 10 cents.

Zacks Rank: Natural Resource Partners carries a Zacks Rank #2. Though a favorable Zacks Rank increases the predictive power of the ESP, a 0.00% ESP makes a surprise prediction uncertain this season.

We note that Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some stocks in the energy space you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:

Foresight Energy LP FELP has an Earnings ESP of +16.67% and a Zacks Rank #3.

Apache Corp. APA has an Earnings ESP of +1.85% and a Zacks Rank #3.

Antero Midstream Partners LP AM has an Earnings ESP of +33.33% and a Zacks Rank #3.

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ANTERO MIDSTRM (AM): Free Stock Analysis Report

NATURAL RSRC LP (NRP): Free Stock Analysis Report

FORESIGHT EGY (FELP): Free Stock Analysis Report

APACHE CORP (APA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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