Summary - Benchmark has reaffirmed a Buy rating and a $29.00 price target on Alliance Resource Partners (NASDAQ:ARLP) after the partnership released fourth-quarter results that exceeded expectations on several metrics. The firm’s note follows data showing the stock trades at a modest price-to-earnings ratio and that the partnership has a long track record of dividend distributions.
Benchmark’s reiteration comes after Alliance Resource Partners reported fourth-quarter adjusted EBITDA of $191 million, ahead of the $181 million consensus estimate and Benchmark’s own $178 million projection. The higher-than-expected EBITDA was supported in part by greater income tied to the company’s recent investment in a coal-fired power plant. On a trailing twelve-month basis the partnership’s EBITDA is $631.44 million.
InvestingPro’s analysis cited in coverage characterizes the company’s financial health as "GOOD" and highlights a P/E ratio of 10.38, suggesting the stock is currently undervalued. The partnership has sustained dividend distributions for 28 consecutive years and carries a current yield of 9.72%.
Management provided initial full-year 2026 guidance for coal sales that Benchmark said is in line with the firm’s prior expectations, even after accounting for the effect of idling the Mettiki mine. Company guidance anticipates the first quarter will be the weakest period of the year, with shipments expected to improve as 2026 progresses.
Operational and financial metrics cited include a reported return on invested capital of 12% and a moderate leverage profile. InvestingPro’s coverage reiterates the partnership’s moderate debt level as part of its broader assessment.
Guidance details included an expense-per-ton estimate for the full year that was about $2 lower than Benchmark had modeled. That reduction in per-ton expense partially offset a price-per-ton target range that came in nearly $1 below Benchmark’s estimate. Management noted there is potential for Illinois Basin realized prices per ton to reach the high end of the guided range due to recent Arctic weather impacts that were not incorporated into the company’s initial forecast.
Beyond its coal operations, Alliance Resource Partners confirmed continued emphasis on growing its oil and gas royalties business and said it is evaluating further investments in coal-fired generation, according to Benchmark’s research note.
In additional reported results, the partnership posted fourth-quarter 2025 earnings per share of $0.64 versus an expected $0.62, representing a 3.23% positive surprise. Fourth-quarter revenue was $535.5 million, below the $555.1 million forecast and constituting a 3.53% shortfall.
The combination of an EBITDA beat, continued dividend durability, and guidance broadly consistent with analyst expectations underpins Benchmark’s maintained Buy rating and $29.00 price target.
Key points
- Benchmark reaffirmed a Buy rating and $29.00 price target on ARLP after Q4 results that beat adjusted EBITDA expectations.
- Financial indicators include a P/E of 10.38, trailing twelve-month EBITDA of $631.44 million, and a dividend streak of 28 years with a 9.72% yield.
- Company guidance for full-year 2026 coal sales aligns with Benchmark’s outlook despite idling the Mettiki mine; management flagged Q1 as the weakest quarter with sequential improvement expected.
Risks and uncertainties
- Revenue missed expectations in Q4 2025, with reported sales of $535.5 million versus a $555.1 million forecast, indicating potential top-line sensitivity in the near term.
- Guidance carries uncertainty from operational decisions such as idling the Mettiki mine and from market variables; realized Illinois Basin prices could move and were not fully reflected in the initial outlook.
- Expense and pricing dynamics per ton may shift results - while expense per ton guidance was lower than modeled, price-per-ton guidance was also slightly below Benchmark’s estimate.