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UGI to Benefit From Investments Amid Rising Interest Rate
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UGI Corporation’s (UGI - Free Report) systematic capital expenditures as well as a joint venture to develop a renewable natural gas project will increase the predictability of its earnings. The company’s regular dividend payment increases its shareholders’ value.
However, this Zacks Rank #4 (Sell) stock faces risks related to rising interest rates, the seasonality of its business and competition from other clean sources.
Tailwinds
UGI continues to make systematic capital investments to address the infrastructural need for various capital projects. The investments are also aimed at increasing the safety and reliability of natural gas production and storage facilities, as well as replacing the aging infrastructure for system upgrading. These additions and updates allow UGI to serve the expanding customer base more efficiently. The company invested $835 million in fiscal 2022, and plans to invest between $4.8 billion and $5.2 billion in the 2023-2026 period.
In February 2023, UGI Energy Services, LLC, a subsidiary of UGI Corporation, and Archaea Energy Inc., a subsidiary of BP, announced a joint venture, Aurum Renewables, LLC, which will develop a renewable natural gas project at the Commonwealth Environmental Systems landfill in Hegins, PA.
The consistent performance of the company enables it to reward its shareholders through annual dividend rate hikes and share repurchases. In fiscal 2022, the company paid dividends worth $296 million, up 4.9% year over year, which is in sync with its long-term dividend growth target of 4% per year. Management of UGI has also approved the extension of its existing share repurchase program up to 8 million shares, for an additional four-year period through February 2026.
Headwinds
UGI’s financial performance might get adversely impacted due to rising interest rates, regulatory and international risks related to costs, and competition from other clean sources.
The company's energy products and services face competition from other energy sources, some of which are cheaper for an equivalent energy value. The use of new technology and government incentives is reducing the cost of utility-scale renewable projects, which can further lower demand for UGI’s services.
The company has a seasonal business. A decrease in the demand for energy products and services because of warmer-than-normal December can lower its profitability. In addition, unprecedented volatility in commodity prices in Europe had a negative impact on average LPG per unit and energy marketing margins in the UGI International segment.
The Zacks Consensus Estimate for Atmos Energy, New Jersey Resources and Spire’s 2023 earnings per share indicates an increase of 7.14%, 5.2% and 9.1%, respectively.
Long-term (three- to five-year) earnings growth of Atmos Energy, New Jersey Resources and Spire is pegged at 7.5%, 6% and 4.22%, respectively.
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UGI to Benefit From Investments Amid Rising Interest Rate
UGI Corporation’s (UGI - Free Report) systematic capital expenditures as well as a joint venture to develop a renewable natural gas project will increase the predictability of its earnings. The company’s regular dividend payment increases its shareholders’ value.
However, this Zacks Rank #4 (Sell) stock faces risks related to rising interest rates, the seasonality of its business and competition from other clean sources.
Tailwinds
UGI continues to make systematic capital investments to address the infrastructural need for various capital projects. The investments are also aimed at increasing the safety and reliability of natural gas production and storage facilities, as well as replacing the aging infrastructure for system upgrading. These additions and updates allow UGI to serve the expanding customer base more efficiently. The company invested $835 million in fiscal 2022, and plans to invest between $4.8 billion and $5.2 billion in the 2023-2026 period.
In February 2023, UGI Energy Services, LLC, a subsidiary of UGI Corporation, and Archaea Energy Inc., a subsidiary of BP, announced a joint venture, Aurum Renewables, LLC, which will develop a renewable natural gas project at the Commonwealth Environmental Systems landfill in Hegins, PA.
The consistent performance of the company enables it to reward its shareholders through annual dividend rate hikes and share repurchases. In fiscal 2022, the company paid dividends worth $296 million, up 4.9% year over year, which is in sync with its long-term dividend growth target of 4% per year. Management of UGI has also approved the extension of its existing share repurchase program up to 8 million shares, for an additional four-year period through February 2026.
Headwinds
UGI’s financial performance might get adversely impacted due to rising interest rates, regulatory and international risks related to costs, and competition from other clean sources.
The company's energy products and services face competition from other energy sources, some of which are cheaper for an equivalent energy value. The use of new technology and government incentives is reducing the cost of utility-scale renewable projects, which can further lower demand for UGI’s services.
The company has a seasonal business. A decrease in the demand for energy products and services because of warmer-than-normal December can lower its profitability. In addition, unprecedented volatility in commodity prices in Europe had a negative impact on average LPG per unit and energy marketing margins in the UGI International segment.
Stocks to Consider
Some better-ranked stocks from the same industry are Atmos Energy Corporation (ATO - Free Report) , New Jersey Resources (NJR - Free Report) and Spire Inc. (SR - Free Report) , each holding a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Atmos Energy, New Jersey Resources and Spire’s 2023 earnings per share indicates an increase of 7.14%, 5.2% and 9.1%, respectively.
Long-term (three- to five-year) earnings growth of Atmos Energy, New Jersey Resources and Spire is pegged at 7.5%, 6% and 4.22%, respectively.