Propane provider Ferrellgas Partners LP's FGP third quarter fiscal 2014 adjusted earnings per unit of 57 cents lagged the Zacks Consensus Estimate of 67 cents by 14.9%.
Quarterly earnings were, however, higher than the year-ago figure by a penny.
Total Revenue
Ferrellgas Partners reported third quarter fiscal 2014 total revenue of $722.1 million, lagging the Zacks Consensus Estimate by 4.6%. However, on a year-over-year basis, the partnership's sales increased nearly 19.7%.
The improvement in revenues was primarily due to a 22.9% year-over-year rise in sales at the Propane and other gas liquids sales segment.. Contributions also improved from the Other segment.
Operating Highlights
In the quarter under review, Ferrellgas Partners' propane sales volume decreased 3.4% year over year to 257.9 million gallons. The decline was due to the challenging weather in its service territories and a 5.1% decline in retail sales.
Quarterly adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) were $99.8 million, up marginally from $98.5 million in the year-ago figure.
Operating expense increased 6.2% year over year to $113.9 million, primarily due to higher cost associated with meeting customer demand while coping with cold temperatures and propane supply shortages.
The partnership generated an operating income of $67.5 million compared with $69.1 million in the year-ago quarter, with higher expenditure taking a toll on operating margins.
Interest expenses in the third quarter dropped 8.6% year over year to $20.2 million.
Financial Highlights
Cash and cash equivalents as of Apr 30, 2014 were $134.4 million versus $6.5 million as of Jul 31, 2013.
The partnership's long-term debt as of Apr 30, 2014 was $1.2 billion, up from $1.1 billion as of Jul 31, 2013.
Guidance
The partnership raised its fiscal 2014 EBITDA guidance to the range of $285–$290 million from an earlier guidance of $275–$285 million. Management is positive about the forthcoming quarters and expects the formation of its midstream division to boost performance going forward.
Other Company Releases
Delek US Holdings, Inc. DK reported earnings per share of 56 cents in the first quarter of 2014, surpassing the Zacks Consensus Estimate of 17 cents by 229.4%.
CVR Refining, LP CVRR posted adjusted first-quarter 2014 earnings of $1.06 per unit, beating the Zacks Consensus Estimate of 72 cents by 47.2%.
Global Partners LP GLP announced adjusted first-quarter 2014 earnings of $2.03 per unit, surpassing the Zacks Consensus Estimate of 61 cents by 232.8%.
Our View
Ferrellgas Partners continues to expand its operations by means of acquisitions. So far in fiscal 2014 (starting Aug 1, 2013) the partnership has acquired four companies. The latest acquisition of Viking Propane in May 2014 will help it to further expand its operation in north central California.
However, these acquired assets are yet to contribute meaningfully to the partnership's earnings. Ferrellgas Partners failed to surpass the Zacks Consensus Estimate in the last four quarters. Rising input costs are eating into the margins of the partnership and affecting profitability.
Though this Zacks Rank #3 (Hold) stock has the capability to turn the tide, going by present performance it will be some time before it actually starts to exceed market expectations.
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