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Reasons to Add UGI Corporation (UGI) Stock to Your Portfolio

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UGI Corporation’s (UGI - Free Report) strategic buyouts, improving customer base and a strong liquidity position are likely to further enhance its performance.

Zacks Rank & Price Performance

UGI Corporation currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of the company have surged 30.7% in the past six months, outperforming the industry’s rise of 10.1%.

Mixed Growth Projections

The Zacks Consensus Estimate for fiscal 2020 earnings is pegged at $2.54 per share and the same for revenues stands at $6.99 billion. The bottom line suggests an increase of 11.40% from the year-ago reported figure. However, the top line indicates a 4.50% decline from the year-earlier reported number.

The Zacks Consensus Estimate for fiscal 2021 earnings stands at $2.87 per share and the same for revenues, $7.78 billion. The bottom line hints at a 12.99% improvement from the prior-year reported figure while the top line implies 11.22% growth from the year-ago reported number.

Robust Inorganic Profile

UGI Corporation’s subsidiary completed the acquisition of GHI Energy, LLC in July with its focus on providing renewable natural gas to vehicle fleets by procuring supply from diverse sources across the country. Moreover, the buyout of AmeriGas Partners, L.P. in the third quarter of fiscal 2019 enables the company to enhance its cash flow for repaying debts and funding capital investments in its natural gas business.

In August 2019, the utility acquired Columbia Midstream Group, LLC (CMG) from TC Energy Corporation (TRP), which is now known as UGI Appalachia. It continued to perform very well in the first nine months of fiscal 2020. Such strategic buyouts will help the company curb competition in the market and grow its customer base, boosting its performance in turn.

Steady Dividend Raises

Having been consistent in its operating performance and efficient capital deployment, the company has been able to reward its shareholders through annual dividend hikes and share repurchases. With two dividend increases in fiscal 2019, UGI Corporation’s dividend saw a CAGR of 9.4% over the past decade. In April, the company raised its quarterly dividend to 33 cents per share. This is the 33rd consecutive year of dividend increase. The utility has a current dividend yield of 3.81% compared with the S&P 500 composite’s 1.60% average.

Strong Financial Position

As of Jun 30, 2020, the company had liquidity of $1.6 billion, up from $1.2 billion in the quarter ending Mar 31, 2020. UGI Corporation’s times interest earned (TIE) ratio improved to 2.65 at the end of third-quarter fiscal 2020 from 2.28 at the end of the fiscal second quarter. The strong TIE ratio reflects the company’s ability to meet its debt obligations in the near future.

Solid Return on Equity (ROE)

ROE is a financial metric that helps an investor understand how efficiently the company is using its shareholders’ funds for generating returns. The company’s ROE for the trailing 12 months is 13.19% compared with the industry’s 13.13%, reflecting its efficiency in utilizing its stockholders’ money.

Stocks to Consider

A few other top-ranked utilities are Essential Utilities Inc. (WTRG - Free Report) , Southwest Gas Corporation (SWX - Free Report) and ONE Gas, Inc. (OGS - Free Report) , all carrying the same Zacks Rank as UGI Corporation at present.

Essential Utilities,Southwest Gas and ONE Gas have a long-term (three to five years) earnings growth rate of 6.01%, 5% and 5.5%, respectively.

Also, Essential Utilities, Southwest Gas and ONE Gas delivered a respective earnings surprise of 9.67%, 6.53% and 0.35%, on average, in the last four quarters.

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