Ferrellgas Partners’ Fiscal 1Q17 Results: Debt Reduction Is a Priority



Leverage ratio

At the end of its latest fiscal quarter (ending October 31, 2016), Ferrellgas Partners’ (FGP) leverage ratio was ~5.8x. This is high compared to the ~4.5x that MLPs (master limited partnerships) usually target, but it’s still lower than the limit allowed under FGP’s credit facility (~6.1x, as of September 2016).

James E. Ferrell, the company’s interim President and CEO (chief executive officer), said, “We are committed to reducing debt and strengthening our balance sheet, with the goal of returning to a leverage ratio of 4.5x or below. While debt reduction is our primary objective at this time, increasing returns to our unitholders remains the top priority for Ferrellgas, and we will continue to take actions to deliver value to all stakeholders over the long term.”

In November 2016, FGP had slashed its distribution for fiscal 1Q17 by 80% from ~$0.51 to $0.1 per unit.

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FGP has fallen 60% year-to-date

Ferrellgas Partners’ stock is down 60% year-to-date. In comparison, AmeriGas Partners (APU) has risen 30%, Star Gas Partners (SGU) has risen 33%, and Suburban Propane Partners (SPH) has risen 26% year-to-date. The above graph compares the stock performance of the four propane MLPs.

FGP stock fell sharply in September following its fiscal 4Q16 results, when the company announced issues related to the Bridger acquisition, the termination of Jamex agreement, its CEO change, and expectations of a distribution cut.

You can read more about the four propane MLPs in Market Realist’s series The Future of Propane According to Four MLPs.

But where do Wall Street analysts expect FGP stock to go from here onward? We’ll discuss this in the next part of this series.


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