8 trends that could affect propane names this winter (Part 1 of 9)
Propane and winter heating
Propane distributors such as Amerigas Partners (APU), Ferrellgas (FGP), and Suburban Propane (SPH) sell propane and related equipment to a variety of end markets. These companies generate the majority of their earnings during the winter heating season, as a large proportion of the propane goes to residential and commercial customers, who use the commodity for home heating. For example, Ferrellgas Partners generated $1.26 billion in revenues for the six months ended April 30, 2013, compared to $705 million for the six months ended October 31, 2012. FGP’s revenue during the colder months was nearly double that of the warmer months. This pattern represents the other propane distributors as well.
So the colder months are critical for earnings. Read on to find out which trends could hurt propane names this winter.
Note: FGP and SPH are also in the Yorkville High Income MLP ETF (YMLP). APU and SPH are in the Global X MLP ETF (MLPA).
Browse this series on Market Realist:
- Part 2 - Why higher propane costs could cause lower sales volumes
- Part 3 - Why higher propane price volatility is a risk to distributors
- Part 4 - Higher oil prices are a potential double whammy for propane sales
- Commodity Markets