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Analyst Blog

On Jun 12, 2013, we upgraded our recommendation on Ferrellgas Partners LP (FGP - Analyst Report) to Outperform from Neutral. The partnership currently has a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

There are several catalysts, which include Ferrellgas Partners’ favorable performance in the third quarter of fiscal 2013 and its focus on customer retention and inorganic growth strategy. Also, reduction in fixed overhead expenses as a result of improvement in operational competence led to this upward revision.

In the third quarter of fiscal 2013, Ferrellgas Partners’ earnings per unit and revenues beat the Zacks Consensus Estimates primarily due to the acquisition of Mr. Bar-B-Q and higher propane sales volume on account of colder than normal temperature.

It is evident from Ferrellgas Partners’ recent activities that the partnership continues to follow steady inorganic growth strategy. In this fiscal, the partnership has already completed four acquisitions - Western Petroleum, Mr. Bar-B-Q, IGS Propane and Flores Gas. This step is part of Ferrellgas Partners’ long-term strategy to grow as one of the top propane companies of the nation along with expanding product portfolio.

Apart from investing in several projects, Ferrellgas Partners also intends to maximize its unitholders’ wealth in terms of paying cash distributions at regular intervals. The partnership paid $119.7 million as cash distribution during the nine months ended Apr 30, 2013. This effort will enable Ferrellgas Partners to attract new investors.

Other Stocks to Consider

Other stocks in the sector that are currently performing well include Alon USA Energy, Inc. (ALJ - Snapshot Report), Enbridge Energy Management LLC (EEQ - Snapshot Report) and Phillips 66 (PSX - Analyst Report) with a Zacks Rank #2 (Buy).

Overland Park, Kan.-based Ferrellgas Partners LP is a leading distributor of propane and related equipment in the U.S. The partnership provides propane services to residential, industrial, portable tank exchange, agricultural and wholesale customers.

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