Inergy Shares Got Crushed: What You Need to Know

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 propane distributor Inergy (NYSE: NRGY  ) fell as much as 24% today as warm weather put pressure on the company's business.

So what: The company said it may reduce distributions and is reviewing operations because of an unexpectedly warm winter, which has crushed demand for propane. Cash flows in 2011 only covered 68% of distributions, so management is going to review future distribution levels and may cut them to match future cash flows.

Now what: The weak demand shouldn't be a huge surprise, especially for those of us in Northern states enjoying the warm weather. But one bad year doesn't make a trend, and I think this sell-off is awfully big considering the fact that next year we could be back to more normal temperature levels. For investors willing to wait out the warmth this year, I think shares will recover long term as cold eventually blankets the country and Inergy's business lights up again.

Interested in more info on Inergy? Add it to your watchlist by clicking here.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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Read/Post Comments (2) | Recommend This Article (9)

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  • Report this Comment On January 27, 2012, at 6:47 PM, 102971 wrote:

    I was a buyer of NRGY this afternoon and am happy to sit with it. I already held the stock on which, until today, I was showing a nice profit, so I doubled up my holding.

    As you say, "one year doesn't make a trend" and I will wait until they announce their year end figures sometime in February.

  • Report this Comment On March 04, 2012, at 1:31 PM, CrazyOtto wrote:

    "...one bad year doesn't make a trend, and I think this sell-off is awfully big considering the <b>fact</b> that next year we <b>could be</b> back to more normal temperature levels."

    We don't need to speculate about climate trends; there is high-quality data on this subject showing long term trends.

    http://www.globalchange.gov/publications/reports/scientific-...

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