FGP's Q4 Loss Wider than Expected

Zacks Equity Research
September 27, 2013

Ferrellgas Partners LP (FGP) reported fourth quarter fiscal 2013 loss per unit of 36 cents, wider than the Zacks Consensus Estimate of a loss of 29 cents. However, the quarterly loss per unit narrowed by 9 cents year over year.

In fiscal 2013, the partnership’s earnings per unit were 71 cents, missing the Zacks Consensus Estimate by 6 cents. The partnership reported a loss of 14 cents per unit in the previous year.

The improvement in results was primarily driven by higher propane sales volumes and improvement in operating efficiencies.

Total Revenue

Ferrellgas Partners reported fourth quarter fiscal 2013 total revenues of $350.7 million, beating both the Zacks Consensus Estimate as well as the year-ago figure by 21.7% and 2.6%, respectively.

An increase in revenues was primarily due to a 0.6% year-over-year rise in sales at the propane and other gas liquids sales segment on the back of higher propane gallon sales and strong contribution from the Other segment.

In fiscal 2013, the partnership’s total sales were $1,975.5 million, surpassing the Zacks Consensus Estimate by $21.5 million. However, total sales decreased 15.5% year-over-year due to lower sales at propane and other gas liquids sales segment.

Operating Highlights

Ferrellgas Partners’ gross profit in the reported quarter improved 8% year over year to $140.4 million primarily due to the improvement in the partnership’s top line.

Operating expenses increased 0.8% year over year to $100.8 million primarily due to additional expenses related to higher gallons sold and a rise in performance-based incentive expense. Higher operating expenses were more than offset by an increase in revenues.

In the reported quarter, operating loss decreased by $6 million to $8 million. The lower cost of borrowing benefited the partnership. Interest expenses decreased 1.8% year over year to $22 million.

Financial Highlights

Cash and cash equivalents as of Jul 31, 2013 were $6.5 million versus $8.4 million as of Jul 31, 2012.

The partnership's long-term debt as of Jul 31, 2013 was $1.1 billion increasing marginally from $1.05 billion as of Jul 31, 2012.

Other Company Releases

Alon USA Energy, Inc. (ALJ) announced second quarter 2013 operating earnings of 27 cents per share, missing the Zacks Consensus Estimate by a penny.

Delek US Holdings, Inc. (DK) announced second quarter 2013 operating earnings of 71 cents per share, down 9 cents from the Zacks Consensus Estimate.

Suburban Propane Partners LP (SPH) reported third quarter of fiscal 2013 loss per unit of 77 cents, wider than the Zacks Consensus Estimate of a loss of 57 cents.

Our View

Ferrellgas Partners follows an inorganic growth strategy and has already completed several acquisitions in fiscal 2013. The partnership continues to reap the benefits from an acquisition-based growth strategy. In the fourth quarter of fiscal 2013, the partnership’s performance improved on the back of strong performance of the Blue Rhino driven by the acquisition of Mr. Bar-B-Q. We believe the acquisition will help the partnership to expand its business under the Blue Rhino brand.

Overland Park, Kansas-based Ferrellgas Partners is a leading distributor of propane gas solutions and related equipment in the U.S. The partnership provides propane services to residential, industrial, portable tank exchange, agricultural and wholesale customers. Ferrellgas Partners currently has a Zacks Rank #2 (Buy).

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