Ferrellgas Acquires Two Blue Rhino Third-Party Distributors

Ferrellgas Partners L.P. FGP announced the buyout of Harvey, LA-based Salathe Gas Co and Walton, IN-based North Star Exchange Inc, which are third-party distributors for Ferrellgas’ Blue Rhino barbecue tank exchange division. The acquisitions are expectedto boost the company’s EBITDA in the propane tank exchange business.

Tank Exchange Business Expansion Plans

Ferrellgas is expanding tank exchange Blue Rhino business, which is less dependent on weather and provides visibility for future earnings. Currently, Blue Rhino tank exchange sales locations have increased more than 10% from the start of the fiscal to more than 53,000 locations.

The partnership’s new Blue Rhino production plants in Alabama and California are online. There are two additional plants, which are expected to be online from fiscal 2019. These projects are expected to reduce cost and induce efficiency in the Northeast and Midwest areas. Acquisitions ofSalathe Gas and North Star Exchange are expected to maximizeprofitability.

Strategy of Acquisition

The partnership is striving to expand business through strategic acquisitions and organic initiatives.By purchasing Blue Rhino independent distributors, Ferrellgas is expanding theirtank exchange operations.The partnership seeks to acquire other propane operators to expand footprint in the United States.Since 1939, the partnership has made nearly 250 acquisitions of independent retail propane companies. We expect the partnership to undertake more such buyouts.

There are other players in the sector who are making acquisitions to expand their business. TOTAL S.A. TOT has inked an agreement with Chevron Corporation CVX to acquire all the share capital of Chevron Denmark Inc.

 Price Movement

In the past 12 months, the stock has lost 59.6% compared with the 2.0% decline of the industry

 

 

Zacks Rank and Stock to Consider

Ferrellgas has a Zacks Rank #5 (Strong Sell).A better-ranked stocks from the same space is Western Gas Equity Partners, LP WGP, which holds a Zacks Rank #2 (Buy) and delivered an average positive earnings surprise of 0.7% in the past four quarters. The Zacks Consensus Estimate for 2018 has moved up 18.6% in the past 60 days.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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