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UGI Corp (UGI) to Gain From Organic & Inorganic Initiatives

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We have recently issued an updated research report on UGI Corporation (UGI - Free Report) . The company delivered fourth-quarter fiscal 2018 adjusted earnings of 9 cents per share, surpassing the Zacks Consensus Estimate of loss of 4 cents by 325%. Moreover, the bottom line improved from the prior-year loss of 2 cents.

UGI Corp. continues to focus on systematic investments for expanding its existing operations coupled with inorganic growth via acquisitions, which will allow the company to gain in the long term.

UGI Corporation Price and Consensus

What’s Aiding the Stock?

UGI Corp. is poised to benefit from further expansion of its Auburn Gathering System, with the construction of two additional compressor stations in Susquehanna County and Wyoming County. Further, the company recently announced the expansion of its Auburn System in Northeast Pennsylvania, with a total capital outlay of $50 million, for the fourth phase of Auburn.

Over the past couple of decades, the company invested in excess of $9.5 billion to address the infrastructural need, while growing its customer base for various capital projects and acquisitions in order to curb competition, increase safety and reliability of its natural gas production and storage facilities, plus replacing the aging infrastructure to modernize the system.

Also, the company announced plans to construct a new LNG storage and vaporization facility in Bethlehem, PA, in order to address the unprecedented demand for LNG services along with supply capabilities throughout the Mid-Atlantic region and New England. These additions will help the company cater more effectively to its rising customer base.

UGI Corp. has a strategy of building the company’s business by focusing on and utilizing its core competencies from the existing businesses to accelerate both internal and inorganic growth in related and complementary businesses. The company completed two acquisitions in fiscal 2018, which added 3 million gallons of motor fuel business to its operations.

However,the company fulfills its propane requirement from a limited number of suppliers with fixed-price contracts. Any disruption in the supply of propane will affect business and profitability. Also, rising interest rate is a headwind as it would raise the cost of procuring funds. The company is exposed to several regulatory and environmental uncertainties, which add to the woes.

Zacks Rank & Key Picks

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

Some better-ranked stocks from the Utility sector are as follows:

Ameren Corporation (AEE - Free Report) carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for current-year earnings has moved 3.1% north over the past 30 days to $3.37 per share.

American States Water Company (AWR - Free Report) has a Zacks Rank of 2. The Zacks Consensus Estimate for 2018 earnings has been revised 0.6% upward over the past 30 days to $1.73 per share.

Entergy Corporation (ETR - Free Report) has a Zacks Rank of 2. The Zacks Consensus Estimate for 2018 earnings has been upwardly revised by 5.1% over the past 30 days to $6.98 per share.

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