S&P RAISES RECOMMENDATION
ON LP UNITS OF FERRELLGAS
PARTNERS TO BUY FROM HOLD
Recent Price : $16.86
FGP reports Jan-Q earnings of $0.47 per unit, versus $0.82 a year earlier, below our $1.00 estimate. Results
were hurt by much warmer than normal weather. With the heating season now nearly over, FGP is unlikely
to recover the earnings shortfall, in our view, and we reduce our FY 12 (Jul.) profit estimate to $0.10 per
unit from $0.65.We expect conditions to improve in FY 13, although we lower our earnings forecast to
$0.70 per unit from $0.85. While our 12-month target price falls by $4, to $18, due to a lower peer yield, we
view the shares' 12% yield as attractive.
Stuart J. Benway, CFA
I tend to agree. And, I don't think I qualify as a "bag" because I sold half my position @ 24 locking down nice gains and also, FGP is only part of a diversified portfolio. And, the largest position in that portfolio is cash.
I would not advise to sell at these level, or worse, short it down from here. Eek.
I heard a rumor that Japan may start increased buying of nat gas from USA, a backlash of local public opposition to re-starting the nuclear reactors. That might help FGP long term.
In other news, my CLNE position is up 30%. That's good for FGP long term too, as CLNE continues its aggressive build-up of nat gas infrastructure. It may even present an opportunity for a partnership.
I'm a 20-year investor, and I try to bet on long term trends. I have a limit order in to pick up another small chunk of FGP @ 14.
Off-topic: my AAPL position is still up ~ 60%. Yay. Holding.
"It is all about free cash flow."
I couldn't agree more - please look at FGP's EBITDA, then deduct what it pays in interest, then deduct capital expenditures, and compare that to how much they are paying out in distributions. Then look at their debt covenants and calculate how long it will be before they breach a covenant and can't borrow any more.
Bags don't mind a ticket on the Titanic as long as the cabins are comfy.
I confess to some scrotal itching and anal clenching, but I have felt that way before, and history has shown that is the equivalent of, in Star Trek parlance, my Ferengi ear lobes tingling.
Really, this is a bet on the weather? One good cold snap or some other energy run and I'm rich - sounds reasonable for a long term investor.
On the risk side, will low NG prices and warm weather persist so long that FGP will have to cut the div? I doubt it, but maybe you know better...
StarMine. Analyst Rankings of them 12-Mar-12 03:17 pm
This is a list of top research analysts based on the accuracy of earnings estimates on FGP, according to StarMine. Analysts that appear here are limited to those covering FGP for a significant period of time. Learn More.
Total Ranked Analysts: 6
EPS Accuracy for FGP - Trailing Two Fiscal Years and Four Quarters
Top-Ranked Analysts FGP Overall Research Reports
Raymond James Five stars
Raymond James Five stars
Barclays Capital Four stars Four stars
Top Analysts in the Gas Utilities Industry:
EPS Accuracy - Industry Excess Return
Londe, Ronald of Wells Fargo Securities, Llc
Moreen, Gabe of BofA Merrill Lynch
Tysseland, John of Citi
In my experience, S&P's sell-side research is not helpful. Their research tends to be quantitative focused and backward looking rather than forward looking. Naturally, what the market cares about is what earnings are going to be like in the future, not what they have been in the past.
Citi's analyst lowered FGP from hold to a sell on July 21, 2011. FGP closed at 22.27 on July 21, 2011.
In my opinion, Citi's analyst has far more credibility on FGP than S&P. I would suggest you listen carefully to Citi's analyst. But do your own DD as everyone (including myself) is wrong sometimes.