UGI Corp Ends Its Fiscal Year on a Positive Note

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UGI (NYSE: UGI) finished its fiscal year about where it expected. While the utility holding company battled warmer weather across all its service territories, it made progress on its initiatives to mute the weather's future impact on its earnings. Because of that, the company expects fiscal 2018 to be an even stronger year.

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UGI results: The raw numbers

Metric

Fiscal Q4 2017

Fiscal Q4 2016

Year-Over-Year Change

Net income

$5.0 million

($43.8 million)

N/A

Earnings per share

$0.03

($0.25)

N/A

What happened with UGI this quarter? 

Hedging helped this quarter:

  • UGI's fiscal fourth quarter is a seasonally low one for the company. However, several of its business segments performed better than they did in the year-ago period. That said, the difference-maker was that the company recorded a $14.9 million gain from foreign exchange and commodity price hedges in this year's fiscal fourth quarter, which more than reversed the $21 million loss from hedging activities it recorded in the year-ago period.
  • For the full year, UGI reported $2.29 per share in adjusted earnings, which was at the low end of its $2.30 to $2.45 per share guidance range. However, the company stated last quarter that it expected to end the year "at or slightly below" that guidance range, so it achieved that muted expectation. It's worth noting, though, that the company still set a record for adjusted earnings per share, which was well ahead of the $2.05 in adjusted earnings it pulled in during fiscal 2016.
  • Several factors fueled the year-over-year improvement. Leading the way was a 15.2% increase in income before taxes from the company's UGI Utilities segment thanks to cooler weather than the prior year and a rate increase at its UGI Gas business. UGI International's adjusted income before taxes increased 2.4% versus the year-ago period thanks to the impact of slightly cooler weather from last year and a decrease in integration expenses from its Finagaz acquisition. Finally, adjusted EBITDA at the company's AmeriGas Propane (NYSE: AGU) subsidiary rose 1.5% due in part to higher sales of support products and lower expenses.
  • The only segment to take a step back last year was midstream and marketing where income before income taxes slipped 2.2% due primarily to higher operating and administrative expenses.

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What management had to say 

CEO John Walsh commented on the company's fiscal year by saying:

This year highlighted the strength and resilience of our business as we delivered record earnings despite weather that was warmer than normal in all of our businesses, and significantly warmer in our domestic businesses. We are seeing the benefits of the investments we have made over the past few years and continue to make significant progress on our projects for the future. These initiatives are reducing our dependence on weather, increasing the diversification of our customer base, markets, and geographies, and building a business that is positioned to perform exceedingly well over the long-term.

The company completed several strategic initiatives over the past year across all four segments. In UGI Utilities it invested $318 million, which helped it add more than 14,000 new customers. Midstream and marketing, meanwhile, completed construction of its Sunbury pipeline and placed its Manning LNG liquefaction plant into service, which turns natural gas into a liquid that can be used to fuel vehicle fleets. UGI International acquired several businesses over the past year, including buying a liquid petroleum gas (LPG) distribution business in Italy. Finally, AmeriGas made five acquisitions last year while also refinancing its debt, which will lower interest expenses.

Looking forward 

UGI anticipates that these strategic initiatives will continue paying dividends by fueling earnings growth. The company's fiscal 2018 guidance reflects this view, with the company projecting that adjusted earnings will rise to a range of $2.45 to $2.65 per share, assuming normal weather conditions. At the midpoint, the forecast suggests that income will increase 11.4% versus fiscal 2017.

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Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool recommends UGI. The Motley Fool has a disclosure policy.