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Ferrellgas (FGP) Cuts Distribution, Strengthens Balance Sheet

CNNX FGP TCP EQGP

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Ferrellgas Partners L.P. (FGP - Free Report) announced a first-quarter 2017 cash distribution rate of 10 cents or 40 cents on an annualized basis. The amount will be payable on Dec 15, 2016 to common unitholders of record as of Dec 8.

Distribution Lowered

The new cash distribution rate pertains to the period between Aug 1, 2016 and Oct 31, 2016, representing the partnership’s first-quarter fiscal 2017. The new distribution rates reflect a significant decline from the previous quarterly payout of 51.25 cents or $2.05 on an annualized basis.

The decision to reduce the cash distribution rate will result in annualized savings of $160 million at the partnership.

To Lower Debt

Ferrellgas Partners intends to utilize the savings generated by the latest reduction in distribution rate to lower its existing leverage and strengthen its balance sheet. The reduction in debt levels will lower interest burden of the partnership.

Our View

Ferrellgas Partners is facing challenging times of late due to the loss of its largest customer as well as the general market conditions. In addition, warmer-than expected temperatures across the U.S. adversely affected demand for propane.

The impact of these factors was quite palpable in Ferrellgas Partners’ last few earnings releases. The partnership has missed the Zacks Consensus Estimate in all of the last four quarters with an average miss of 215.6%.  

However, Ferrellgas Partners expects all of its segments to be driven by organic customer growth and proper utilization of assets.

Zacks Rank & Key Picks

Ferrellgas Partners currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the oil and gas space are EQT GP Holdings, LP (EQGP - Free Report) , CONE Midstream Partners LP (CNNX - Free Report) and TC PipeLines, LP (TCP - Free Report) . All these stocks currently have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

EQT GP Holdings, CONE Midstream Partners and TC PipeLines have each surpassed earnings estimates by a respective 5.26%, 8.11% and 6.56% in the last reported quarter.

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