4 Propane Distribution MLPs: Performance and Future Prospects
AmeriGas Partners’ ratings
Among surveyed analysts, 20% rate AmeriGas Partners (APU) a “buy,” 60% rate it a “hold,” and 20% rate it a “sell.” The consensus target price for AmeriGas Partners is $47.40. From its current price of $39.40, this would mean an upside of 20% in a year.
A decline in year-over-year EBITDA (earnings before interest, tax, depreciation, and amortization) over the last two quarters combined with expectations of a warmer winter might have contributed to the low percentage of “buy” recommendations for AmeriGas Partners. APU forms ~0.06% of the PowerShares Dividend Achievers ETF (PFM).
Ferrellgas Partners’ ratings
The graph above compares the analysts’ ratings for the four MLPs. Ferrellgas Partners (FGP) has received a “hold” rating from 40% of the analysts and a “sell” rating from the remaining 60%. None of the analysts surveyed rated the MLP a “buy.” The consensus target price for Ferrellgas Partners is $20.20. FGP currently trades at $20.10.
Ferrellgas Partners’ significantly high leverage makes it unattractive. The ratings indicate that analysts possibly believe FGP’s higher leverage to be more negative than the expected benefits from acquisitions funded by the borrowings. Analysts might also consider FGP’s relatively high EV-EBITDA (enterprise value to EBITDA) multiple a sign of possible overvaluation.
Suburban Propane Partners’ ratings
Among the analysts surveyed by Bloomberg, one-third rated Suburban Propane Partners (SPH) a “buy,” 44% rated it a “hold,” and 22% rated it a “sell.” The consensus one-year price target for Suburban Propane Partners is $37.30. This target implies a return of 25% in a year from the MLP’s current market price of $29.90.
SPH has recorded high year-over-year EBITDA growth over the last two quarters. Its relatively low leverage, growth capital investments, and depressed unit price resulting in high current yield make it attractive among the four MLPs.
Star Gas Partners’ ratings
All the analysts surveyed rated Star Gas Partners (SGU) a “hold.” The consensus price target for the MLP is $11, implying a return potential of 41% from its current market price of $7.80.
After a strong March 2015 quarter results, SGU reported negative EBITDA growth in the June quarter. Its low leverage, stable distribution growth, and retention of cash flows for growth make it an MLP to watch. Analysts may, however, believe SGU’s unit price is already elevated and may like to see the upcoming results in December to better understand the prospects.
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