We reiterate our Neutral recommendation on
Ferrellgas Partners LP
) primarily due to its overdependence on a few propane suppliers;
highly competitive propane distribution business environment and
seasonal variance in the demand for propane, which may
extensively impact the partnership's operational and financial
performance going forward.
In the first quarter of fiscal 2013, Ferrellgas reported net loss
per unit of 22 cents compared with a loss of 42 cents in the
prior-year quarter. Quarterly result was narrower than the Zacks
Consensus Estimate of a loss of 23 cents.
Ferrellgas' total revenue of $362.9 million in the quarter was
down 33% from $538.4 million reported in the comparable year-ago
period. Reported revenue was lower than the Zacks Consensus
Estimate of $452 million.
FERRELLGAS -LP (FGP): Free Stock Analysis
SUBURB PROPANE (SPH): Free Stock Analysis
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Ferrellgas is dependent on a few major propane suppliers. If one
of the suppliers fail to provide required propane in time, then
its operations might get hampered. Subsequently, this will
negatively affect the partnership's overall results.
Weather conditions also have a significant impact on the demand
for propane. This makes the partnership's financial performance
vulnerable to warm winters and unfavorable weather in the
grilling season. Warmer-than-normal temperatures during winter or
dry or warm weather during the harvest season would result in
reduced propane usage, thus significantly impacting partnership's
However, Ferrellgas strongly follows an inorganic growth
strategy. Recently, the partnership made numerous significant
acquisitions including IGS Propane and El Paso. In addition, the
partnership has adopted a balance sheet restructuring plan and
debt level minimization strategy.
Like its peer
Suburban Propane Partners L.P.
), Ferrellgas Partners LP also has a short-term Zacks #3 Rank
Overland Park, Kansas-based Ferrellgas Partners is a leading
distributor of propane and related equipment in the U.S. The
partnership provides propane services to residential, industrial,
portable tank exchange, agricultural and wholesale customers.
Ferrellgas has a market capitalization of $1.40 billion.