UGI Corp.'s Investments Are Starting to Pay Off

By Matthew

Warmer-than-normal weather over the past few years has had a noticeable impact on UGI's (NYSE: UGI) financial results because the company's subsidiaries rely on cold weather to fueldemand for the heating fuels they distribute. Unfortunately, those weather patterns didn't improve during the company's fiscal second quarter, which dragged down demand in several of its segments. While the company's investments to lessen the impact of the weather on its results are starting to pay off, that still might not be enough to enable the company to hit its full-year targets.

Continue Reading Below

UGI results: The raw numbers


Fiscal Q2 2017

Fiscal Q2 2016

Year-Over-Year Change

Adjusted net income

$231.8 million

$216.2 million


Adjusted EPS




Data source: UGI Corporation.

More From

Image source: Getty Images.

What happened with UGI this quarter?

The weather stayed above normal again:

  • The company's AmeriGas Propane Partners (NYSE: APU) subsidiary posted mixed results. While revenue rose 4.4% to $863.6 million, retail gallons sold declined 6% due to temperatures that were 13.3% warmer than normal and 2.9% warmer than the prior year. Worse yet, the critical heating months of January and February were 9.9% warmer than last year. That warmer weather, along with much higher prices for LPG, drove an 8.2% decrease in Adjusted EBITDA versus the prior year at AmeriGas Propane.
  • Adjusted income at UGI's international segment rose 8.2% during the quarter to $122.9 million. Driving that result was a 5.2% increase in retail gallons sold versus the prior year due in part to cooler weather than last year, though the temperature remained well above normal. Meanwhile, operating expenses declined thanks to lower integration expenses associated with the Finagaz acquisition.
  • Midstream and marketing income also increased versus last year, rising 8.4% to $83.8 million. The company benefited from higher natural gas prices versus the prior year as well as higher peaking revenue thanks to improved prices for pipeline capacity.
  • The UGI utilities segment's income edged up 0.9% to $106.1 million. While temperatures were 11.7% warmer than normal across its service area and 3.3% higher than last year, the company's gas utility experienced higher throughput while UGI gas captured higher rates as a result of a recent rate case settlement.

What management had to say

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

As Walsh points out, the company continues to face a significant headwind from warmer than normal temperatures. To combat that problem, the company has made investments in Europe, including Finagaz, which paid off during the quarter. In addition, the company continues making investments in the U.S. that are also working to reduce the impact of the weather.

Meanwhile, the company keeps pushing forward with new projects to reduce future weather-related earnings volatility. One of the largest is the PennEast pipeline, which earlier this month received the Final Environmental Impact Statement from regulators. That puts the project one step closer to approval, keeping it on pace to enter service next year.

Looking forward

That said, despite all the positives on the quarter, Walsh warned that "[b]ased on the results of the first half of the year, and in particular the exceedingly warm weather we have experienced, we are expecting full year adjusted EPS to be at the lower end, or slightly below, our guidance range of $2.30 to $2.45."

10 stocks we like better than UGIWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and UGI wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of May 1, 2017

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