On Mar 5, 2013, we upgraded our recommendation on Ferrellgas Partners LP (FGP) to Outperform from Neutral. The partnership’s earnings surpassed the Zacks Consensus Estimates on two out of last four quarters. In the last quarter, the partnership posted positive earnings surprise of 4.35%. Ferrellgas Partners currently has a Zacks Rank #3 (Hold).
Reasons for Upgrade
The revision in recommendation was primarily driven by Ferrellgas Partners’ steady acquisition strategy, decline in operating costs, strong liquidity positions and steady effort toward debt minimization.
Ferrellgas Partners’ recent acquisition of IGS Propane will allow the partnership to provide on-time services with lower transportation costs given its positional advantage. These acquisitions are part of the partnership’s long-term strategy to grow as one of the top propane companies.
In addition, Ferrellgas Partners has taken up a restructuring plan for its balance sheet and aims to lower its debt level with the issuance of common units. In the last fiscal year, the partnership issued 1.4 million common units, worth $25.0 million, to redeem part of its outstanding debts. These initiatives will ease up the balance sheet and lower the interest burden.
Riding on the strong positives, the Zacks Consensus Estimates for fiscal-year 2013 earnings per unit currently stands at 59 cents, reflecting year-over-year growth of 753.3%.
Other Stocks to Consider
Besides Ferrellgas Partners, other stocks in the industry that are currently performing well include Calumet Specialty Products Partners LP (CLMT), Global Partners LP (GLP) and NGL Energy Partners LP (NGL). All of these presently carry a Zacks Rank #1 (Strong Buy).
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