Suburban Propane (SPH) Q3 Revenue Up 2%

Suburban Propane Partners (SPH -2.51%), one of the nation’s largest retail propane distributors, released results for its fiscal third quarter on August 7, 2025. The key headline: GAAP earnings per share missed expectations, coming in at $(0.23) compared to the analyst estimate of $(0.17). Revenue (GAAP) also fell below projections at $260.15 million versus the expected $270.0 million, though that total did mark a 2.2% increase compared to the third quarter of fiscal year 2024. Despite these misses, the company’s core propane sales volumes stayed steady, costs remained controlled, and the quarterly distribution was maintained at $0.325 per unit. Management cited continued debt reduction and stable platform investment, but overall, the period reflected little progress in profitability or volume growth compared to Q3 FY2024.

Source: Analyst estimates for the quarter provided by FactSet.

Suburban Propane Partners: What the Business Does, and Current Areas of Focus

Suburban Propane Partners operates as one of the largest retail propane distributors in the United States, serving about one million customers across 42 states. Its main offering is retail propane that is used for home heating, cooking, agricultural uses, and small businesses. The company also sells refined fuels, natural gas, and electricity to a lesser extent, but propane supply remains its core business.

Recently, Suburban Propane has shifted focus toward three principal areas. The first is investment in renewable energy production, especially renewable natural gas (RNG) facilities and related partnerships. Second is customer base expansion and retention—management wants to maintain and grow its national presence. Finally, operational efficiency and cost control has become a key focus, as it faces changing customer demand and tighter regulatory environments. Key success factors include the ability to grow propane volumes, realize returns from its renewables investments, maintain cost discipline, and comply with environmental standards.

Quarter in Review: Financial and Operational Highlights

During the quarter, Suburban Propane's core retail propane operations remained steady. The company sold 71.9 million propane gallons, almost identical to the 71.7 million in Q3 fiscal year 2024. Notably, this occurred during a quarter that was 14% warmer than average but 5% cooler than the prior year third quarter—meaning improved weather didn't translate to higher demand. Propane revenue (GAAP) reached $226.9 million, a modest increase from the previous year's $220.0 million (GAAP) for Q3 FY2024. Despite a 4.7% increase in wholesale propane prices, Unit sales and gross margin (non-GAAP) showed no real growth from the same period last year.

The renewables platform, focused on renewable natural gas facilities, continued to face challenging market conditions. The company said average daily RNG injection—meaning the amount of renewable gas delivered to pipelines—was slightly down from a year ago, citing lower prices for environmental attributes. Environmental attribute credits, such as those under the Renewable Fuel Standard, drive revenue for renewable fuel producers by putting a market value on cleaner production. Depressed prices for these credits stunted revenue for the renewables business again. Construction continues at new RNG sites in New York and Ohio, but so far, renewables do not add meaningfully to earnings.

Cost management remained a theme. Combined operating and general & administrative expenses ticked up 0.5% to $136.3 million, with higher payroll and benefit costs largely offset by an insurance recovery gain. Adjusted EBITDA, which measures earnings before interest, taxes, depreciation, and amortization and strips out one-time items, was flat with last year at $27.0 million. Gross margin—a measure of profit after the direct costs of goods sold—was also flat, unchanged from the prior year (non-GAAP).

Suburban Propane continued its focus on strengthening its balance sheet. It used excess cash and proceeds from an at-the-market equity sales program to pay down $69 million in debt, improving its consolidated leverage ratio to 4.33x for the twelve-month period ended Q3 FY2025.

The company also held its quarterly distribution steady at $0.325 per unit—unchanged from the previous quarter and prior year. This equates to $1.30 annualized per Common Unit based on the quarterly distribution declared. The company’s dividend remains a key feature for unitholders, but no increase was declared or signaled, reflecting uncertainty in both profits and growth.

Renewable Energy Expansion, Customer Initiatives, and Operational Discipline

The company has invested in renewable propane, RNG, and hydrogen, acquiring assets and entering partnerships aimed at building out its renewables platform. Ongoing work continued on the Stanfield, Arizona RNG facility, and new anaerobic digester and gas upgrade projects in Upstate New York and Columbus, Ohio remained under construction this period. While management highlighted operational enhancements, average daily RNG injection was down slightly from last year and revenues remain pressured due to weak pricing for environmental attributes, which are credits tied to how clean fuel production is. Regulatory uncertainty—such as unfinalized federal rules about which RNG production qualifies for production tax credits—adds further unpredictability.

On the customer side, Suburban Propane maintained its base at around one million accounts nationwide, but failed to demonstrate clear growth or major wins. Management references ongoing retention and acquisition initiatives, but flat propane volumes hint at slowing organic growth and create questions about near-term sales momentum. The company also continued promotion of its capabilities through corporate partnerships—such as supplying propane for on-site services at NASCAR events—though these efforts have not materially changed customer numbers.

From an operational standpoint, the company demonstrated continued expense discipline. Operating costs, including payroll, increased only slightly despite inflationary pressures, largely thanks to a one-time insurance recovery. However, flat gross margins and Adjusted EBITDA (non-GAAP) underline ongoing constraints in improving unit economics; cost discipline is counterbalancing rising expenses, but not leading to margin expansion. Growth capital expenditures were up approximately 5.4% year-over-year.

On the regulatory front, compliance and environmental responsibility continued to drive spending and planning. Management cited risks tied to changing policy for production credits and renewable attribute pricing as ongoing hurdles. Markets for credits like California’s Low Carbon Fuel Standard (LCFS) and D3 Renewable Identification Numbers (RINs) remain volatile and have undercut earnings from renewables. The company said it will maintain consistent investment in lower-carbon fuels and build out its renewables and compliance infrastructure but offered no positive near-term signals that these markets are improving.

Looking Ahead: Guidance and Key Trends for Investors

Management did not provide numeric forward guidance for the fourth quarter or the full fiscal year. The official commentary focused on priorities such as operational discipline, continued debt reduction, and persistent long-term investment in renewables—even as near-term results in those areas fall short of targets. No profit, revenue, or unit sales forecast was offered for upcoming periods.

Investors following Suburban Propane should watch for several key developments in future quarters: first, whether the roll-out and operation of new RNG facilities translate into improved Adjusted EBITDA or revenue from renewables; second, if propane sales volumes and margins can show expansion, reversing recent flat trends; third, signs of regulatory clarity or market recovery in environmental attributes markets, which directly impact renewable profits. The distribution was held at $0.325 per unit, unchanged from the previous quarter and prior year.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.