UBS Cuts Price Target as Ferrellgas Partners (FGP) Cuts Distribution
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UBS reiterated a Sell rating on Ferrellgas Partners LP (NYSE: FGP), and cut the price target to $5.00 (from $6.50), following the company's announced distribution cut. Based on current estimates, UBS believes that the roughly 80% distribution cut that FGP announced will allow it to remain in compliance with its leverage covenants.
Analyst Shneur Gershuni commented, "FGP announced an ~80% distribution cut to $0.40/unit from $2.05/unit on an annualized basis. This cut is greater than our previous estimate of a ~75% cut to $0.51/unit, and the cut to $1.00/unit on an annualized basis that was mentioned on its FY4Q16 conference call that its Board was contemplating. Management noted that if the quarterly distribution of $0.10/unit ($0.40/unit annualized) is maintained throughout FY17, that on an annualized basis capital savings would be roughly $160MM which would be used to reduce leverage, increase liquidity and improve its balance sheet."
Shares of Ferrellgas Partners LP closed at $7.33 yesterday.
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