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Are Efforts to Bring Ferrellgas Partners Back on Track Working?

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Updated

FGP’s numerous issues

Ferrellgas Partners’ (FGP) performance has been under severe pressure in the last few quarters. FGP stock has tumbled significantly after its fiscal 4Q16 results, when the company announced issues related to the Bridger acquisition, the termination of the Jamex agreement, a CEO change, and an 80% distribution cut in November 2016.

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Ongoing efforts

Discussing the efforts to bring FGP back on track, James Ferrell, the company’s interim president and chief executive officer, said in the fiscal 2Q17 earnings release, “The leadership changes we announced earlier this year are going to reap significant benefits. Dan Giannini at Bridger and Geoff Berger at Blue Rhino are going to drive growth and improved results.”

“In addition, Randy Schott, a 28-year veteran of Ferrellgas and Sr. Vice President in charge of our large Retail propane business has also instilled a growth mindset in his people. Morale in the company could not be higher,” continued Ferrell.

Leverage ratio

At the end of the quarter ending January 31, 2017, Ferrellgas Partners’ leverage ratio was 5.8x, which is high compared to ~4.5x that MLPs usually target. Still, it is lower than the limit allowed under FGP’s credit facility. The limit under the facility is 6.05x, as amended in September 2016.

Year-to-date stock performance

Ferrellgas Partners’ stock is down 6% year-to-date. In comparison, AmeriGas Partners (APU) is down 6%, Star Gas Partners (SGU) is down 15%, and Suburban Propane Partners (SPH) is down 18% year-to-date. The above graph compares the stock performance of the four propane MLPs.

Where do Wall Street analysts expect FGP stock to go from here? We’ll look at this question in the next part of this series.

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