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UGI's Capital Investments & Aim to Reduce Emissions Augur Well

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UGI Corporation (UGI - Free Report) continues to focus on systematic investments in expanding its existing operations along with strategic acquisitions, which will boost its performance in the long term. Also, the company’s target to build a clean energy portfolio acts as a tailwind.

We recently issued an updated research report on UGI Corp. The Zacks Consensus Estimate for fiscal 2021 earnings is pegged at $2.90 per share, indicating growth of 8.61% from the year-ago reported figure. Also, the consensus mark for fiscal 2022 earnings stands at $3.18, suggesting 9.66% growth from the prior-year reported number. Additionally, long-term (three-five years) earnings growth of the company is projected at 8%.

The company currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past three months, shares of this utility have gained 18.8%, outperforming the industry’s rise of 17.1%.

What’s Aiding the Stock?

UGI Corp continues making systematic capital investments in maintaining and enhancing its infrastructure, and growing via acquisitions. These projects will help curb competition, increase the safety and reliability of natural gas production and storage facilities plus replace the aging infrastructure with a modernized system. After slashing its fiscal 2020 capital expenditure, UGI Corp. estimates a total of $850 million investment for fiscal 2021.

Further, consistent customer wins will spur demand for its services. Notably, the utility added 12,000 residential heating and commercial customers in fiscal 2020. All these developments will assist it to achieve the long-term annual earnings per share growth target of 6-10%.

Moreover, the company is making efforts to strategically reduce emissions and provide services generated by eco-friendly resources. In third-quarter fiscal 2020, it completed the buyout of GHI Energy, LLC, a renewable natural gas company operating in California. This will enable it to expand its renewable product offerings and support its growth goals in an environmentally-friendly way. Along with acquisitions, the company disposed its 5.97% ownership interest in the Conemaugh coal-fired generating station in fiscal 2020 to lower the total Scope I direct emissions by more than 30%

Headwinds

However, the company fulfills its propane requirement from a limited number of suppliers with fixed-price contracts. Any disruption in the supply chain will affect business and profitability. Also, the company is exposed to several regulatory and environmental uncertainties in domestic and international operations.

Stocks to Consider

A few better-ranked stocks in the same sector are NewJersey Resources Corporation (NJR - Free Report) , Spire Inc. (SR - Free Report) and Korea Electric Power Corporation (KEP - Free Report) , all carrying a Zacks Rank #2 (Buy), currently.

The long-term (three-five years) earnings growth rate of NewJersey Resources, Spire and Korea Electric Power is pegged at 6%, 5% and 5%, respectively.

The Zacks Consensus Estimate for NewJersey Resources and Spire’s fiscal 2021 earnings has moved 8.1% and 1.7% north in the past 60 days, respectively. Also, the Zacks Consensus Estimate for Korea Electric Power’s 2021 earnings has been revised 2.9% upward in the past two months.

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