Ferrellgas' Inorganic Growth Plans Yield Results - Analyst Blog

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On Jul 10, we issued an updated research report on Ferrellgas Partners LP ( FGP ). The partnership follows a strategic acquisition program to expand its scale of operations. It usually buys assets having similar lines of businesses, which are immediately accretive. In addition, the partnership's current business diversification initiative, a favorable liquidity position and payment of regular cash distribution are important catalysts.

As far as Ferrellgas' inorganic growth strategy is concerned, in the nine months ended Apr 30, 2014, it has completed six retail propane acquisitions, taking the tally to about 248 to date.

On Jul 1, 2014, Ferrellgas acquired Mount Vernon, OH-based Wise Choice Propane, an independently owned propane retailer. Earlier, the partnership completed acquisitions of Kaw Valley Propane, Viking Propane and several others.

This Zacks Rank #1 stock has effectively expanded its product and service offerings through these acquisitions. They have also provided a steady cash inflow. In the first nine months of fiscal 2014, the acquired units fetched around $1.5 million.

Ferrellgas is currently diversifying its business by entering into salt water disposal services. In May 2014, the partnership acquired fluid logistics provider, Sable Environmental, LLC. Sable is active in the Eagle Ford Shale region of south Texas. In the future, the transaction will enable Ferrellgas to expand its revenue stream.

Ferrellgas maintained a stable liquidity position backed by a steady cash generation capacity. As of Apr 30, 2014, the partnership's cash balance was $134.4 million while $600 million was available under its secured credit facility. In the first nine months of fiscal 2014, the partnership's operating cash flow was $103.9 million.

Acquisitions apart, Ferrellgas also utilizes its funds for maximizing unitholder value through the payment of regular cash distribution.

Key Picks from the Sector

Other stocks worth considering in the same sector include Calumet Specialty Products Partners LP ( CLMT ), Global Partners LP ( GLP ) and Sprague Resources LP ( SRLP ). All these stocks carry a Zacks Rank #1 (Strong Buy).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: FGP , GLP , CLMT , SRLP

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