How Ferrellgas Plans to Keep Cashing In

On Thursday, Ferrellgas Partners (FGP) will release its latest quarterly results. The master limited partnership might not be in the glamorous part of the energy space, but that hasn't held it back from posting good returns for investors.

Ferrellgas sells propane, with its best-known product consisting of its Blue Rhino pick-up and drop-off propane tanks for gas grills and other small-scale applications. But the company also serves wholesale markets by selling propane and other refined fuels. Let's take an early look at what's been happening with Ferrellgas over the past quarter and what we're likely to see in its quarterly report.

Stats on Ferrellgas

Source: Yahoo! Finance.

Can Ferrellgas' earnings get hot this quarter?
In recent months, analysts have raised their views on Ferrellgas and its earnings prospects, boosting their estimates for the April quarter by $0.08 per share and increasing their full-year fiscal 2014 consensus by the same figure. The stock has performed well, rising about 7% since the end of February.

Most investors have focused lately on the huge finds in the oil and natural gas industry. Forgotten in the energy boom, however, has been propane, which is a byproduct of oil refining and natural-gas processing. With millions of people in the U.S. using propane as a primary heat source and with plenty of commercial uses as well, the market for propane is far from small.

Consolidation has been the name of the game for growth in the propane industry lately, with some deals having made big changes to the industry over the past year. Last spring, Inergy (CEQP) decided to sell off its retail propane business to Suburban Propane (SPH 2.49%), vastly increasing Suburban's size while giving Inergy a big stake in its former rival. Meanwhile, Ferrellgas has continued its string of more modest acquisitions, with the company's buyout of privately held Western Petroleum marking the fifth purchase Ferrellgas has made since last August.

For retail purposes, though, AmeriGas (APU) remains the biggest competitor for Ferrellgas, with 2 million customers scattered across the nation. That makes AmeriGas about twice as big as Ferrelgas by customer base, and AmeriGas has also been aggressive in purchasing up small businesses to add to its reach.

In Ferrellgas' report, watch for the company to comment on its future acquisition strategy. With such a big ramp-up in revenue already, it's still important for Ferrellgas to get as big as possible to stand up to its rivals. Otherwise, it could find itself a target itself, and while that wouldn't necessarily be bad for investors, it's likely not what Ferrellgas management has in mind as an exit strategy.

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