We recently published a list of 10 Best Pipeline and MLP Stocks to Invest In According to Analysts. In this article, we are going to take a look at where Alliance Resource Partners L.P. (NASDAQ:ARLP) stands against other best pipeline and MLP stocks to invest in according to analysts.
The global pipeline market is part of the energy sector, influenced by the demand and supply of energy. According to a report by Fortune Business Insights, the global pipeline transportation market reached a valuation of $20.57 billion in 2023. Forecasts indicate this market will expand to $34.38 billion by 2032. This growth trajectory represents a Compound Annual Growth Rate (CAGR) of 5.43% throughout the projected period. Notably, North America holds the leading position in the global market in 2023, capturing a 43.32% share.
The United States possesses an extensive and intricate network of pipelines, vital for the transportation and storage of oil, natural gas, and other energy products. The U.S. pipeline network is a critical component of the national energy infrastructure, facilitating the safe and efficient transportation of oil, natural gas, and NGLs, supporting economic activity and ensuring energy security. This infrastructure forms the backbone of the nation’s energy sector, ensuring the efficient movement of resources from production sites to consumers. In a report published by IBISWorld, the Oil Pipeline Transportation sector in the US stands at a value of $15.9 billion in 2024.
The pipeline industry is continuously evolving, driven by technological advancements and changing energy demands. Innovations in pipeline materials, monitoring systems, and leak detection technologies are improving safety and efficiency. The growing focus on reducing greenhouse gas emissions is also driving the development of pipelines for transporting carbon dioxide for sequestration and hydrogen for clean energy applications.
The IEEFA report highlighted that the fossil fuel sector has underperformed the broader market in 7 of the last 10 years. This shows a general trend of underperformance of the fossil fuel sector, which pipelines are a part of, when compared to the general market. However, during terms of economic recovery, increased industrial activity and consumer spending typically lead to higher energy demand, benefiting pipeline companies, leading to improved performance. Especially in terms of the current President’s administration.
Companies in the fossil fuel segment could benefit from the current administration’s potential rollback of climate initiatives, while renewables could face headwinds from reduced government support.
Pipeline companies have underperformed the overall market performance, especially over the past 5 years where TECH firms have been the centre of attention due to the popularity of AI amongst investors. This highlights an opportunity for investors seeking stable dividend yields or steady income streams. The pipeline industry can be attractive to investors during economic recovery due to its potential for stable cash flow and dividend payouts.
Master Limited Partnerships (MLPs) offer distinct advantages over traditional U.S. stocks, primarily centred on their unique tax structure and resulting higher yields. Unlike corporations that face double taxation, MLPs are pass-through entities, meaning profits are distributed directly to unitholders (investors) without incurring corporate income tax. The current tax rate for corporations in the US is 21%, compared to MLP stocks which pay between 10-20%. This can translate to consistent distributions, often yielding higher than traditional dividend-paying stocks; with yields often to be in the range of 5%-8%, or more, whereas the market’s average dividend yield is much lower, generally around 2%. Given this, we will take a look at some of the best pipeline stocks.
Our Methodology
For this list, we used the Finviz stock screener to filter out pipeline and MLP stocks. Next, we manually searched for the average upside potential of each stock and selected 10 stocks with the highest values. The list below is ranked in ascending order of the upside potential as of March 14.
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Jim Cramer Sees a Potential Comeback for Alliance Resource Partners (ARLP) – Here’s Why
A coal-loading terminal with trucks lined up to be loaded.
Alliance Resource Partners L.P. (NASDAQ:ARLP) is a diversified natural resource company focused on coal production and marketing. The company serves utilities and industrial users across the US, operating through four segments—Illinois Basin Coal Operations, Appalachia Coal Operations, Oil & Gas Royalties, and Coal Royalties. It produces thermal and metallurgical coal with varying sulfur and heat contents.
The company manages seven underground mining complexes in multiple states. While additionally owning and leasing oil and gas mineral interests and coal mineral reserves, the company operates a coal loading terminal on the Ohio River.
Beyond coal, Alliance Resource Partners L.P. (NASDAQ:ARLP) supplies mining technology products and services, including data networks, communication systems, proximity detection, collision avoidance, and analytics software.
Alliance Resource Partners L.P. (NASDAQ:ARLP)’s Q4 2024 results showed a top line of $590.09 million, missing estimates by $45.51 million and EBITDA was $124 million. For the full-year 2024, revenues were $2.4 billion, adjusted EBITDA was $714.2 million, net income was $360.9 million, and EPS was $2.77.
The consensus by analysts on Alliance Resource Partners L.P. (NASDAQ:ARLP)’s average twelve month trading price is $30.50, representing an upside of 23.28%.
Overall, ARLP ranks 2nd on our list of best pipeline and MLP Stocks to invest in according to analysts. While we acknowledge the potential for ARLP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ARLP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
