Why Natural Resource Partners (NRP) Bombed on Friday

NEW YORK (TheStreet) -- Natural Resources Partners (NRP) is dropping like a stone on Friday after issuing disappointing 2014 guidance. By mid-morning, the stock had bombed 15.4% to $17.21.

After the bell Thursday, the coal miner said 2013 guidance will remain as previously issued. Revenue is expected between $205 million and $220 million and the company expects net income of $1.40 to $1.60 a share. Analysts surveyed by Thomson Reuters had hoped for net income of $1.46 a share on $346.72 million in revenue.

"We did not see the recovery in the coal markets that we thought might occur over the course of 2013, but instead the markets weakened," said CEO Nick Carter in a statement.

For fiscal 2014, management issued guidance well below analyst consensus. The Houston-based business said it expects net income in the range of $1.10 to $1.30 a share and revenue between $305 million and $340 million. Consensus was for net income of $1.54 cents a share and revenue of $346.92 million.

TheStreet Ratings team rates NATURAL RESOURCE PARTNERS LP as a Buy with a ratings score of B-. The team has this to say about their recommendation:

"We rate NATURAL RESOURCE PARTNERS LP (NRP) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has slightly increased to $65.87 million or 6.46% when compared to the same quarter last year. In addition, NATURAL RESOURCE PARTNERS LP has also modestly surpassed the industry average cash flow growth rate of 0.96%.
  • The gross profit margin for NATURAL RESOURCE PARTNERS LP is currently very high, coming in at 92.73%. Regardless of NRP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NRP's net profit margin of 48.16% significantly outperformed against the industry.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, NATURAL RESOURCE PARTNERS LP has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
  • NRP, with its decline in revenue, underperformed when compared the industry average of 5.6%. Since the same quarter one year prior, revenues fell by 20.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • In its most recent trading session, NRP has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.

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