Thesis

ARLP trades near 52-week lows (-4.7% 1Y) while Peabody (BTU) is up 98% on the same thermal coal demand thesis. The PJM capacity auction cleared every MW of coal at the FERC cap with 93% of 2026 tons already committed. This connects to the broader power demand supercycle - data centers driving 76 GW of new demand by 2026, reserve margins below targets, coal retained as baseload because new generation can't scale fast enough.

Evidence

Q4 2025 earnings (8-K filed 2026-02-02):

  • Beat: $0.64 vs $0.57 est
  • EBITDA +54% YoY
  • 2026 volumes up, 93% committed
  • Royalties +25%

PJM capacity auction:

  • All coal MW selected at FERC cap
  • Auction clears through 2028
  • Reserve margins below target
  • Data center demand cited as structural driver

Valuation vs BTU:

  • ARLP: $23.82 (26% of 52-wk range), 8.9x fwd P/E, 10.5% yield, beta 0.29
  • BTU: 91.5% thermal EBITDA, +98% 1Y
  • Same demand dynamics, 100% price divergence

Technical setup:

  • Near 52-week lows
  • Options IV at 24th percentile (cheap)
  • P/C ratio 0.55 (bullish positioning)
  • Multiple insider buys Feb 2025 (CEO, COO, CFO)

Coverage gap:

  • Only 2 analysts (both Buy, $29-33 targets = 22-38% upside)
  • Market may still model secular decline vs structural demand through 2028

Edge Assessment

Where edge lives:

  • Cross-ticker pattern synthesis (PJM connects to 20+ tickers tracking power demand supercycle)
  • BTU/ARLP price divergence despite similar thermal exposure
  • Coverage gap (2 analysts) + retail can act before institutions accumulate

Factor decomposition needed:

  • Idio vol 22.2%, beta 0.29 (mostly company-specific)
  • Edge likely in company-specific timing + sector trend market underprices

Catalyst Timeline

  • PJM auction outcomes visible now (2026-2028 committed)
  • 93% of 2026 tons sold (cash flow visibility high)
  • Data center demand growth visible in NRG, BEPC updates

Risk Factors

  • Cash flows declining YoY (offset by leverage discipline)
  • $28M battery investment impairment
  • Bitcoin on balance sheet (capital allocation question)
  • Terminal value concerns (market pricing coal as stranded asset)

Verdict

Not urgent, but warrants watchlist. The PJM auction is a verifiable data point (not management guidance) that pushes back against terminal decline narrative. BTU price action suggests market rewards thermal coal when thesis becomes consensus. ARLP at 52-week lows with 10.5% yield, cheap options, insider buying, and structural demand support through 2028 is the kind of asymmetry worth monitoring.

Next steps: Factor regression to quantify edge %, compare to BTU's realized performance, assess if 8.9x fwd P/E already prices the demand extension or if street still models secular decline.