Alliance Resource Partners: 1Q24 Earnings Confirm That The Value Is Durable

Core Viewpoint - Alliance Resource Partners, L.P. (ARLP) remains an attractive investment due to its strong cash generation, low valuation multiples, and high dividend yield despite challenges in the coal market [2][5]. Financial Performance - Q1'24 total sales decreased to $651.7 million from $662.9 million in Q1'23, primarily due to lower average selling prices of coal [4]. - EBITDA for Q1'24 was $235 million, down by approximately $35 million compared to Q1'23, but increased by about 29% from Q4'23 [4]. - The adjusted EBITDA in Q1'24 reached a record high of $31.4 million from the royalty segment, indicating strong performance in this area [4]. Market Context - The coal market in 2023 was favorable, with strong demand and pricing, setting a high benchmark for 2024 [4]. - Management has reiterated its commitment to achieving 2024 performance targets, supported by a well-contracted order book and a strong start in the Oil & Gas Royalties business [4]. Investment Case - The annualized EPS based on recent figures is approximately $4.80, with a dividend payout ratio of less than 60% [5]. - The forward dividend yield for 2024 is projected at 13.2%, supported by strong cash generation and a net debt to EBITDA ratio of around 0.3x [5]. - The combination of stable coal prices and increased revenues from the royalty segment reinforces the investment case for ARLP [5].