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88% of Analysts Recommend Ferrellgas Partners as a “Sell”

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CEO change

On the same day of its fiscal 4Q16 earnings release, Ferrellgas Partners (FGP) announced that Stephen L. Wambold would step down from “his roles as President and Chief Executive Officer and as a member of the Board,” effective immediately. FGP appointed James E. Ferrell as interim president and CEO. Ferrell is the company’s founder and the chairman of the board of directors.

Wambold’s sudden departure has been taken by investors as a signal that all is not well in the company. This added to their concerns, which was reflected in a 21% slide in FGP’s share price on the day of the announcement.

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Capital deficit

Due to a net loss of $665.4 million in fiscal 4Q16, FGP’s partners’ capital showed a deficit of $469 million on July 31, 2016. This compares with a positive partners’ capital balance of $390 million on July 31, 2015.

Analyst recommendations

Of the analysts surveyed by Bloomberg after Ferrellgas Partners’s fiscal 4Q16 results, 88% recommended a “sell” and the remaining 12% recommended a “hold.” None of the surveyed analysts rated FGP as a “buy.” The above table shows recommendations for FGP from some of the brokers surveyed.

The consensus target price for FGP in one year is $12.60. This implies a -3% price return from FGP’s closing price of $13 on September 28, 2016.

In comparison, 64% analysts rated AmeriGas Partners (APU) as a “hold” and 82% rated Suburban Propane Partners (SPH) as a “hold.”

What lies ahead?

Ferrell stated in the company’s earnings release, “We are committed to strengthening our balance sheet by de-levering in a meaningful way. We are confident this action will support the long-term interests of our unitholders, employee-owners and other stakeholders, and we look forward to growth in distribution when our leverage ratio and debt return to more reasonable levels.”

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