On Mar 22, 2013, we downgraded our recommendation on
Ferrellgas Partners L.P.
) to Neutral from Outperform. This U.S. propane distributor
currently has a Zacks Rank #3 (Hold).
Why the Downgrade?
Ferrellgas Partners' several negative factors including over
dependence on a few propane suppliers, a highly competitive
propane distribution business environment and intense competition
from other energy sources compel our downward revision.
In the second quarter of fiscal 2013, ending Jan 31, Ferrellgas
Partners reported mixed results. Revenues were in line with the
Zacks Consensus Estimate, while earnings per unit fell short of
Causes for Concern
Ferrellgas Partners is dependent on a few major propane
suppliers. If one of the suppliers fails to provide required
propane in time, then its operations might get hampered.
Subsequently, this will negatively affect the partnership's
Ferrellgas Partners faces competition from other types of energy
like electricity, oil and natural gas. Some of these are less
costly than the equivalent energy value of propane. These
different types of energies are threats to the future of propane
Weather conditions also have a major impact on the demand for
propane. Warmer-than-normal temperature during winters or dry or
warm weather during the harvest season would result in reduced
propane usage, thus significantly impacting the partnership's
Other Stocks to Consider
Besides Ferrellgas Partners L.P., other stocks from the industry
Calumet Specialty Products Partners LP
Lehigh Gas Partners LP
Marathon Petroleum Corporation
) are presently performing well and currently carries a Zacks
Rank #1 (Strong Buy).
CALUMET SPECLTY (CLMT): Free Stock Analysis
FERRELLGAS -LP (FGP): Free Stock Analysis
LEHIGH GAS PTNR (LGP): Free Stock Analysis
MARATHON PETROL (MPC): Free Stock Analysis
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