UBS Cuts Price Target as Ferrellgas Partners (FGP) Contemplates Distribution Cut
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UBS maintained a Sell rating on Ferrellgas Partners LP (NYSE: FGP), and cut the price target to $6.50 (from $10.00), as the company contemplates a reduction of its distribution to $1.00/unit from $2.05/unit on an annualized basis.
Analyst Shneur Gershuni commented, "With its FY4Q earnings, FGP noted that due to increased leverage and higher debt levels, from increased debt from the Bridger acquisition, the Jamex settlement and the effect of warmer weather on propane earnings that its board is contemplating a reduction of its distribution to $1.00/unit from $2.05/unit on an annualized basis. This decision is not final, but is an option to reduce its leverage and remain in compliance with its covenants. However, with September and October weather warmer than normal and running a distribution cut to $1.00/unit through our model, without accounting for a much colder than normal winter, we estimate that FGP would not remain in compliance with is covenants. Hence, we expect FGP to cut its distribution by 75% to $0.51/unit on an annualized basis in order to be in compliance with its amended covenants."
Shares of Ferrellgas Partners LP closed at $7.54 yesterday.
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