ALLIANCE RESOURCE PARTNERS LP (ARLP): what the price assumes

boothcheck covers ALLIANCE RESOURCE PARTNERS LP (ARLP) but does not put one priced-in number on it: here the defensible answer is the evidence rather than a point estimate. boothcheck publishes no house fair value, target price, or buy/sell rating. Narrative composed 2026-07-25.

Generated: 2026-09-07 · Exported: 2026-09-09 · Source: https://boothcheck.com/report/ARLP

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 8.1% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: n/a

Valuation X-Ray

The price is supported by earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Earnings, Relative, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.2%); the inversion above states its own rate.

Per-Model Detail (n=12)

Solvency

Bullet Takeaways

• Coal sales are about 88% of revenue, with oil and gas royalties at 6% and transportation and other lines making up the balance, so the diversification is real but it is not yet the business.
• This year is largely settled: 2026 coal sales volumes were reaffirmed at 33.75 to 35.25 million short tons and are over 95% committed and priced at the guidance midpoint.
• The pressure is on price, not tonnage: first-quarter 2026 revenue fell 4.5% to $516.0 million on lower coal pricing even with volumes higher and royalty revenue at a record.

Bull Case

Take the objection first, because everybody has already made it. Coal is a shrinking fuel in American power generation, the plants that burn it keep closing, and the partnership's own annual report does not pretend otherwise. It warns that environmental rules push power generators to make capital investments to retrofit power plants and may contribute to retirements of older coal-fired generating units. Such retirements could reduce demand for coal, and it names the winner of that contest without flinching: Our primary competition is from natural gas-fired plants that are relatively more efficient and less difficult to permit than coal-fired plants. None of that is arguable. The question is whether the business in front of us behaves like something dying, and whether the price has already assumed that it does.

On the first count, two things stand out. The trailing operating margin is 14.2%. BTU is running an operating margin of roughly -4.0%, and CNR is at about -2.3%. HCC, which sells steelmaking coal rather than thermal, manages around 9.7%. In a period when several of the larger producers cannot clear their own operating costs, this one is turning roughly a seventh of every revenue dollar into operating profit. That is not a survival characteristic. It is a cost-position characteristic.

The second is the shape of the order book. The annual report describes the model directly: We market our coal through established customer relationships and competitive bidding processes, with a significant portion of our volumes sold under long-term coal supply agreements. These contracts provide enhanced predictability of sales volumes and pricing for both us and the buyer. That is why the current year is already over 95% committed and priced at the midpoint of volume guidance. A declining industry with a booked year is a genuinely different proposition from a declining industry selling into the spot market.

Behind the contracts sits tonnage that does not run out soon: On December 31, 2025, we had approximately 586.5 million tons of coal mineral reserves. And the partnership is not only a miner. It reports a royalty business holding oil & gas mineral interests held by Alliance Minerals as well as our equity interests in AllDale III, alongside a coal royalties segment that collects on reserves leased both to its own complexes and to third parties. A royalty dollar arrives with no extraction cost behind it, which is why a line that is 6% of revenue does more work than that share suggests.

Which brings the objection back around to the price. The market is paying about 11.3 times trailing operating profit, low enough that the units sit beneath what even a 5% a year contraction in operating profit would support. The decline is not merely acknowledged in that number. It is the assumption.

Bear Case

Begin with the capital structure, because in a partnership that hands most of its cash to unitholders the balance sheet is the only shock absorber, and this one is thin. Net debt runs about $467.1 million, roughly 1.51 times operating profit. On its own that is unremarkable. What makes it structural is what sits opposite: the annual report puts cash and equivalents of $71.2 million at December 31, 2025, so there is very little standing between a bad year and a decision about the payout.

The filing does not soften what that decision looks like. Cash distributions to unitholders are not guaranteed. The payment and amount of any future distribution will be subject to the sole discretion of the Board of Directors and will depend upon many factors, it states, before listing them. For a security most of whose holders are there for the quarterly cheque, that discretion is the fragility. It is not a covenant they can point to. It is a preference the board can revise.

There is also a date on the calendar. The Credit Agreement matures on March 9, 2028, at which time the aggregate outstanding principal amount of all Revolving Credit Facility advances and all Term Loan advances are required to be repaid in full, and the term borrowings already carry a rate the filing records as 7.27 % as of December 31, 2025. A partnership that distributes its cash does not repay maturities out of retained earnings; it refinances them. Doing that as a thermal coal borrower, while pricing is falling, is not a routine errand.

The earnings direction makes the timing worse rather than better. First-quarter 2026 revenue fell 4.5% to $516.0 million on lower coal pricing, and net income for the quarter came in at $9.1 million. Set that against trailing twelve-month operating profit near 309.8 million dollars and the slope is visible without a chart. The units are priced for contraction, which is fair. The bear question is whether 5% a year is the right slope, because the most recent quarter did not behave like a business declining gently.

Underneath all of it, demand is not the partnership's variable to set. Its own filing lists among its dependencies our ability to provide fuel for growth in domestic energy demand, should it materialize. That conditional is carrying a great deal of weight. A committed year is a real asset and also a one-year asset; every renewal is negotiated against a customer fleet with fewer members than the last time.

The bull answer is that the price already carries the decline, and it does. The reply is narrower: a decline priced at one slope and delivered at a steeper one is precisely how cheap cyclicals stay cheap, and this balance sheet does not leave much room to wait for the cycle to be wrong.

Valuation

The unusual feature here is not what the price assumes but how little it assumes. The market is paying about 11.3 times trailing operating profit, a multiple low enough that the units sit beneath what even a 5% a year contraction in operating profit would justify. Against a unit price of $24.72 as of July 25, 2026, nobody is underwriting a recovery, a stabilization, or a transition. What is being underwritten is the possibility that the decay runs shallower than the price has already booked.

The methods largely agree with that reading, which is itself worth noting. Peer multiples land above where the units trade. The earnings-power approaches land above them as well, and the approaches that project cash forward land in roughly the same neighbourhood as the current quote. Not one family of method reads these units as expensive, which is a rare thing to be able to write and a reason to look harder at what the market might be seeing that the arithmetic is not.

The interesting disagreement sits inside the earnings-power lens rather than between families. That approach values the business on a five-year average of operating profit with one-time charges added back, and that average runs meaningfully above the trailing year. So the method is not really saying the partnership is cheap against today. It is saying today is below its own five-year mean. For a cyclical business that is the whole question, and it has two honest answers: either the last twelve months are a trough in an ordinary cycle, or the five-year average is anchored to a coal price environment that is not coming back. Nothing in the figures settles which, and any report claiming otherwise is guessing.

The revenue mix argues gently, though not decisively, for the first reading. Coal sales are about 88% of revenue. The oil and gas royalty line at 6%, together with the coal royalty stream underneath the mining segments, carries no extraction cost, so it holds up when tonnage pricing does not. NRP, the one structurally comparable royalty partnership in the group, posts an operating margin near 65.6%, which is what a royalty stream looks like when it is not dragging a mine along behind it.

Leverage decides how long any of that can be held. Net debt sits near 1.51 times operating profit with interest covered 7.7 times, which is comfortable while the mines are earning. It reads differently alongside the 2028 credit agreement maturity, because a partnership that distributes its cash refinances rather than repays. The multiple is low for a reason, and the reason has a date attached to it.

Catalysts

The first quarter of 2026 set the tone for the year. Total revenue was $516.0 million, down 4.5% from $540.5 million a year earlier, with weaker coal sales realizations the cause and record oil and gas royalty revenue plus higher coal volumes partly offsetting it. Net income for the quarter was $9.1 million.

Two decisions accompanied those numbers. The quarterly cash distribution was held at $0.60 per unit, an annual rate of $2.40, and 2026 coal sales guidance was reaffirmed at 33.75 to 35.25 million short tons with more than 95% of the midpoint already committed and priced. Holding the distribution while quarterly earnings compress is a statement of intent rather than a statement of capacity, and it is the single item most worth tracking from here.

Beyond the next quarterly print, the structural date is the March 9, 2028 maturity of the credit agreement, which the annual report specifies requires all revolving and term borrowings to be repaid in full. Everything between now and then is a question of whether contracted volumes and royalty income can carry the payout while thermal pricing works through its cycle.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• BTU (PEABODY ENERGY CORP)
• FY2025 10-K: …mineral resources from lower to higher levels of geological confidence should not be assumed. Actual coal tonnage recovered, as well as related revenue and expenditures, from identified reserve and resource areas or properties may vary materially from estimates. Thus, these estimates may not accurately reflect its…
• FY2025 10-K: …of coal prices and demand, it is reasonably possible that coal prices may decrease and/or fail to improve in the near term, which, absent sufficient mitigation such as an offsetting reduction in the Company's operating costs, may result in the need for future adjustments to the carrying value of its long-lived mining…
• HCC (Warrior Met Coal, Inc.)
• FY2025 10-K: …among the highest quality steelmaking coals in the world and is preferred as a base steelmaking coal in our customers' blends. Our marketing strategy is to focus on international markets mostly in Europe and 11 South America where we have a shipping time and distance advantage. In recent years, due to a combination…
• FY2025 10-K: …operating and compliance costs and could have a material adverse effect on our operations and/or, along with analogous foreign laws and regulations, our customers' ability to use our products. Due in part to the extensive and comprehensive regulatory requirements, along with changing interpretations of these…
• CNR (Core Natural Resources, Inc.)
• FY2025 10-K: …competitors or market preferences. In particular, as we continue to evaluate a potential new line of business involving REEs, our strategy may include expanding into the exploration, development, extraction, processing, separation, or commercialization of REEs and related downstream activities. These initiatives are…
• FY2025 10-K: …conditions of any of the industries we serve or that are served by our customers could adversely affect our business, financial condition, results of operations, cash flows and liquidity in a number of ways. For example: • demand for electricity in the U.S. is impacted by industrial production, which, if weakened,…
• NRP (NATURAL RESOURCE PARTNERS LP)
• FY2025 10-K: …departments that do not earn revenues. Costs incurred by these departments include interest and financing, corporate headquarters and overhead, centralized treasury, legal and accounting and other corporate-level activity not specifically allocated to a segment. Our financial results by segment for the year ended…
• FY2025 10-K: …Suite 3325, Houston, Texas 77002 and our telephone number is (713) 751-7507. 1 Table of Contents Segment and Geographic Information The amount of 2025 revenues and other income from our two operating segments is shown below. For additional business segment information, please see " Item 7. Management's Discussion and…
• CCJ (Cameco Corp)
• FY2025 40-F: …in Rule 12b-2 of the Exchange Act. Emerging growth company ☐ If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting…
• FY2025 40-F: …99.8 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.9 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.10 Consent of Alain D. Renaud, P. Geo. 99.11 Consent of Biman Bharadwaj, P. Eng. 99.12 Consent of Scott…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.