Q1 earnings snapshot and why it matters for unitholders

Alliance Resource Partners (ARLP) reported first quarter revenue of US$516.02 million and net income of US$9.09 million, alongside a maintained US$0.60 per unit cash distribution and updated 2026 sales volume guidance.

The current unit price of US$26.18 comes after a 7.06% 1 month share price decline and a 12.41% year to date share price return, while total shareholder return over 5 years has been very large, suggesting long term holders have still seen strong gains despite recent softness.

If this earnings update has you reassessing your exposure to energy and infrastructure, it can be useful to widen the lens and review 35 power grid technology and infrastructure stocks

With Q1 profit at US$9.09 million, a maintained US$0.60 distribution and the unit price at US$26.18, is this an undervalued income play, or is the market already pricing in future growth?

Preferred P/E of 13.8x: Is it justified?

On a P/E of 13.8x at a unit price of $26.18, Alliance Resource Partners screens as good value compared with peers and the broader US Oil and Gas sector.

The P/E multiple compares the current unit price to earnings per unit, so it reflects what the market is currently willing to pay for each dollar of profit. For a business with high quality earnings and a history of 7.2% annual earnings growth over the past 5 years, a lower P/E than peers can signal that expectations are more muted than the recent track record.

ARLP is trading below the peer average P/E of 21.7x and also below the US Oil and Gas industry average P/E of 14.9x, which is a meaningful gap. It is also below the estimated fair P/E of 21.8x that the fair ratio model suggests the market could move towards if sentiment and fundamentals align more closely.

Alongside the multiple based view, the SWS DCF model estimates a future cash flow value of $78.95 per unit compared with the last close of $26.18. This model projects future cash flows and discounts them back to today, so it focuses on what the business may generate in cash over time rather than current earnings alone. For a diversified natural resources partnership with coal, royalties and related technology businesses, that kind of cash flow lens can matter as much as near term profit metrics.

Result: Price-to-earnings of 13.8x (UNDERVALUED)

However, you also need to weigh coal market demand shifts and any changes in energy policy, as these could affect ARLP’s earnings power and valuation.

Another view from the SWS DCF model

The P/E of 13.8x suggests ARLP looks inexpensive, but the SWS DCF model goes further, estimating future cash flows at $78.95 per unit versus the current $26.18 price. That gap points to a very different story, so which signal do you trust more: earnings today or cash flows over time?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Alliance Resource Partners for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 51 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Curious whether the balance of risks and rewards here fits your own comfort level and time horizon? Take a closer look at the full breakdown of 3 key rewards and 1 important warning sign.

Ready to hunt for more investment ideas?

If ARLP has sharpened your focus, do not stop here. Broaden your watchlist now so you are not late to the next opportunity.

• Target resilient performers that aim to limit downside and smooth out volatility with the 72 resilient stocks with low risk scores.
• Zero in on companies that combine attractive pricing with quality fundamentals by checking out the 51 high quality undervalued stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.