June 7, 2011
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Ferrellgas Partners (NYSE: FGP ) , which deals in propane and propane accessories, tanked this morning to the tune of 10.1% on very heavy volume.
So what: This morning's third-quarter report impressed with $732 million in revenue, far above the analyst consensus of $679 million, but fell 42% short of earnings expectations with just $0.33 of adjusted net income per unit. CEO Steve Wambold pinned the debacle on sharply higher propane costs, which inspired customers to conserve their gas while inflating the top line.
Now what: The parent of the Blue Rhino brand claims to be "very well positioned for the all-important grilling season," helped by the addition of Blue Rhino exchange stations at thousands of Walgreen (NYSE: WAG ) and Safeway (NYSE: SWY ) stores. The stock's meaty 8% dividend yield isn't enough to make up for the meager 1.5% price appreciation over the past year, so Ferrellgas unitholders are aching for sunny skies, plenty of tailgating, and lower propane prices this summer. The stock made it through the last bout of inflated propane prices back in 2007 (only to crash during the market meltdown of 2008 -- when propane was cheap!). This could be a great time to load up on a stable dividend dandy.
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