Saturday, February 04, 2006

UGI Analysis (updated)

In the past section, we covered UGI and looked at its balance sheet. (

UGI is in the propane, natural gas/electric utility and services business. In the past several years, it has been growing faster than its industry peers and has consequently seen its stock price rise. Of late, UGI's star has fallen because of the missed earnings compared to analyst estimates. While the company remains solid, we will look at this quarter's balance sheet.

UGI had a good quarter overall - with revenues increasing in every business segment with the exclusion of international propane. There were some tax related gains in this segment in the same period last year. The increase in revenue and operating income (year over year) by percentages are as follows:

Amerigas Propane +13%
International Propane -3.96%
Gas Utility +19%
Electric Utility +7%
Energy Services +37%

The earnings growth in each business (year over year) is as follows:

Amerigas Propane +27%
International Propane -56%
Gas Utility + 25%
Electric Utility +38%
Energy Services +34%

The operating income took a hit because of the 56% drop in income in international propane. This likely is a one time event that probably wont last in the upcoming quarters.

The revenues in the gas utility business should continue to increase given the companies decision to buy Souther Unions decision to sell PG Gas in Pennsylvania to UGI. The energy services business is humming at full speed and the growth rates across all busineses with the exception of international propane looks good.

The debt to total capitalization is one of the highest in the industry at around 64% compared to the industry average of 55%. However, it does look like the company has plans to pay off some debt in the upcoming quarter. The stock looks attractive at the current P/E of 12 compared to its peers. Although earnings will decline this year compared to last, the growth should resume from the next fiscal year.

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