Ferrellgas Partners, L.P. (FGP) plunged on Thursday, slumping more than 18% by 2:45 p.m. EDT. Fueling the downdraft: the propane company's weak fourth-quarter results, which fueled more concerns about its financial situation.
Ferrellgas Partners generated $8.2 million in EBITDA during the fourth quarter, which was well below the $19.2 million it produced in the year-ago quarter. While volumes were 1.6% higher, operating expenses expanded at an even faster pace as the company continued to position for future customer and sales growth by opening additional selling locations.
Another factor weighing on the company is its financial situation. That led it to sell its midstream and Global Sourcing businesses, as well as to secure a $575 million credit facility to boost its liquidity. However, Ferrellgas Partners noted that it continues to evaluate various options related to its outstanding bonds; it's looking at refinancing or exchanging them to give itself more breathing room. Interim CEO Jim Ferrell stated on the accompanying conference call that the company is working on long-term solutions to address its capital structure, even if they impact its sky-high 17.4%-yielding distribution to investors.
While Ferrellgas is working to solve its balance-sheet problems, it's unclear what actions it will take. Investors should steer clear of this ultra-high-yield stock until it's back on solid ground, and consider buying other stocks instead.