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Key indicators investors should watch for in the propane sector

Ingrid Pan, CFA

Key analysis: The most important trends in propane right now (Part 5 of 7)

(Continued from Part 4)

Important indicators

As winter heating season runs its course, there will be a few main points to watch for propane distributors. Ferrellgas Partners (FGP) is on a different reporting schedule and will soon disclose earnings for the three months ended January 31, 2014. As the other two companies have only reported results through the end of December, FGP’s earnings could indicate how propane distributors have been managing through January on a quantitative level—and the market will be looking at FGP’s qualitative comments about the propane distribution environment in recent weeks.

Other factors to watch will include propane inventories, which investors can view as a sort of proxy for propane supply. For the back half of the heating season, market participants may watch to see if inventories decline at a faster or slower rate than past heating seasons. Plus, the market will be watching propane prices. Higher and more volatile propane prices would be negative, as they make passing on price increases to end customers more difficult, thereby eroding margins. Higher prices also make customers more conservative with propane use.

Investors will also be looking to see if cold weather persists, as this buoys propane demand and the volume of propane sales to consumers.

Continue to Part 6

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