Suburban Propane: Hold Rating Justified by Q2 Performance Shortfalls and Mixed Financials

Analyst Ned Baramov from Wells Fargo maintained a Hold rating on Suburban Propane (SPH – Research Report) and keeping the price target at $17.00.

Ned Baramov has given his Hold rating due to a combination of factors pertaining to Suburban Propane’s performance in the second fiscal quarter. The company’s adjusted EBITDA of $147 million fell short of both the consensus and Baramov’s own estimate of $164 million, suggesting that the company’s earnings before interest, taxes, depreciation, and amortization were not as robust as anticipated. Additionally, retail propane volumes were lower than expected, with sales reaching 140 million gallons compared to the forecasted 155 million gallons, primarily due to warmer winter weather that likely reduced demand for heating.

The analyst’s decision was further influenced by Suburban Propane’s free cash flow per unit, which at $1.74 was below the projected $1.94, again reflecting lower sales of propane. Capital expenditures were also below expectations at $14.5 million, against the estimated $20 million. Despite these underperformances, the partnership maintained its quarterly distribution rate at $0.325 per unit, which aligned with estimates. Furthermore, a slight decrease in leverage from the previous quarter was observed. These mixed financial metrics contribute to a cautious outlook, leading to Baramov’s Hold rating, which suggests investors should maintain their current position without further buying or selling shares at this time.

According to TipRanks, Baramov is an analyst with an average return of -9.1% and a 51.35% success rate. Baramov covers the Energy sector, focusing on stocks such as Sunoco, Antero Midstream, and Western Midstream Partners.

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Suburban Propane (SPH) Company Description:

Suburban Propane Partners LP engages in the business of liquefied petroleum gas business. It operates through the following business segments: Propane; Fuel Oil and Refined Fuels; Natural Gas and Electricity; and All Other. The Propane segment engages in natural gas processing and petroleum refining. It also used in residential and commercial applications, industrial applications and agriculture. The Fuel Oil and Refined Fuels segment refers to the marketing and distribution of fuel oil, kerosene, diesel fuel and gasoline primarily to the northeast region of the United States. The Natural Gas and Electricity segment pertains to the generation, transmission, and distribution of natural gas and electricity among residential and small commercial customers. The All Other segment include the sale, installation and service of whole-house heating products, air cleaners, humidifiers, and space heaters to the customer who uses propane, fuel oil, natural gas and electricity businesses. The company was founded by Mark Anton in 1928 and is headquartered in Whippany, NJ.