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Ferrellgas (FGP) Expands Blue Rhino Business Via Acquisition

Zacks Equity Research
Economic Data Deluge

Ferrellgas Partners L.P. FGP announced the acquisition of Sikeston, MO-based Reliable Propane, a long-time independent distributor for Blue Rhino. The acquisition is expected to boost the company’s results and expand the propane business.

Strategy of Acquisition

The partnership is focuses to expand business through strategic acquisitions and organic initiatives. Ferrellgas is striving to expand the tank exchange segment and trying to improve operational efficiencies with lower production as well as delivery expenses. To expand footprint in the United States, the partnership has acquired nearly 300 independent retail companies since 1939.

Tank Exchange Business Expansion Plans

Ferrellgas is expanding tank exchange Blue Rhino business, which is less dependent on weather and provides visibility for future earnings. Currently, Blue Rhino tank exchange sales locations have increased more than 12% from the beginning of the fiscal year to more than 53,800 locations. Approximately 25% of gallon sales growth can be attributed to weather and 20% to approximately 10,000 new customers added in first-quarter fiscal 2019.

The partnership registered retail propane customer growth of 24,500 in the first-quarter fiscal 2019, up 4% from prior-year quarter’s levels.  Blue Rhino production plants in Alabama and California are online and helping the company gain customers. We expect the recent acquisition to widen the partnership’s customer base.

 Price Movement

The stock has plunged 58.56% in the past 12 months.

Some better-ranked stocks from the same sector are CONSOL Energy Inc CEIX, Canadian Solar Inc. CSIQ and Golar LNG Partners LP GMLP. While Consol Energy and Canadian Solar sport a Zacks Rank #1 (Strong Buy), Golar LNG Partners holds a Zacks Rank #2 (Buy).

CONSOL Energy delivered average positive earnings surprise of 53.86% in the past four quarters. The Zacks Consensus Estimate for earnings moved up 6.3% in the past 60 days to $3.86 per share.

Canadian Solar delivered average positive earnings surprise of 49.66% in the past four quarters. The Zacks Consensus Estimate moved up 2.08% in the past 60 days to $2.45 per share.

Golar LNG Partners delivered an average positive earnings surprise of 92.75% in the past four quarters. The Zacks Consensus Estimate moved up 3.6% in the past 60 days to $1.15 per unit.

Zacks Rank and Stock to Consider

Ferrellgas has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

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