Alliance Holdings GP, L.P. (AHGP) reported a 13% positive earnings surprise on April 26 while also announcing its 12th consecutive quarterly distribution hike.

It yields a solid 4.1%.

Analysts have been raising their estimates off the strong quarter and are projecting double-digit earnings growth for AHGP over the next two years. It is a Zacks #2 Rank (Buy) stock.

Alliance Holdings GP, L.P. is a limited partnership formed to own and control Alliance Resource Partners, L.P. (ARLP), which produces and markets coal to large utilities and industrial users in the U.S.

AHGP derives all of its earnings and cash flow from its ownership interests in Alliance Resource Partners L.P.

First Quarter Results

On April 26, AHGP reported first quarter earnings per limited partner unit of 86 cents, well ahead of the Zacks Consensus Estimate of 76 cents. It was a 25% increase over the same quarter in 2010.

Total revenues were $423.2 million, an 11% increase over the same quarter in 2010, driven by a 12% increase in coal sales.

The company was able to leverage its operating expenses, which fell from 62.9% of sales to 60.5%. Meanwhile, operating income jumped 25%.

Estimates Rising

Analysts have been raising their earnings estimates following the strong Q1 earnings beat, sending the stock to a Zacks #2 Rank (Buy).

Current consensus estimates are forecasting solid growth for AHGP over the next two years. The Zacks Consensus Estimate for 2011 is $3.36, representing 15% growth over 2010 EPS.

The 2012 consensus estimate is 12% higher at $3.77.

Income Rising

AHGP generates strong cash flow and has been rewarding unitholders with consistent distribution increases.

AHGP: Alliance Holdings GP, L.P.

Cash flow from operations rose 13% in the first quarter of 2011, for instance, and AHGP recently announced that it is raising its quarterly cash distribution by 19% year-over-year to $0.555 per unit. This marks its 12th consecutive quarterly increase.

It currently yields an attractive 4.1%.

Reasonable Valuation

The stock pulled back a bit after AHGP announced on March 28 that it was pursuing a secondary public offering of common units.

AHGP: Alliance Holdings GP, L.P.

This could be a good entry point for investors with shares sporting a PEG ratio of 1.1. The stock is trading at 14.9x forward 12-month earnings, essentially in-line with its historical median.

Its price to sales ratio of 1.9 is in-line with the industry average.

Alliance Holdings GP, L.P. is headquartered in Tulsa, Oklahoma. It has a market cap of $3.1 billion.

Todd Bunton is the Growth & Income Stock Strategist for

ALLIANCE HLDGS (AHGP): Free Stock Analysis Report
Zacks Investment Research