AmeriGas (APU) is the nation's largest propane company, serving over 1.3 million residential, commercial, industrial, agricultural and motor fuel propane customers in nearly 50 states.
AmeriGas is probably known more to investors as a stock with very high cash distributions, nearly 6.6% currently. However, I am concerned that this may not be sustainable for the company. Read below at the 10 year income statement of AmeriGas.
INCOME STATEMENT: 10-YEAR SUMMARY
DATE | SALES | EBIT | DEPRECIATION | TOTAL NET | EPS | TAX RATE |
09/11 | 2.54 Bil | 141.31 Mil | 94.71 Mil | 138.52 Mil | 2.30 | 0.30 |
09/10 | 2.32 Bil | 170.76 Mil | 87.40 Mil | 165.21 Mil | 2.80 | 1.90 |
09/09 | 2.26 Bil | 230.20 Mil | 83.77 Mil | 224.64 Mil | 3.59 | 1.10 |
09/08 | 2.82 Bil | 161.98 Mil | 80.39 Mil | 158.02 Mil | 2.73 | 1.00 |
09/07 | 2.28 Bil | 194.24 Mil | 75.59 Mil | 190.78 Mil | 3.26 | 0.40 |
09/06 | 2.12 Bil | 92.88 Mil | 72.25 Mil | 91.16 Mil | 1.59 | 0.20 |
09/05 | 1.96 Bil | 63.78 Mil | 73.63 Mil | 60.85 Mil | 1.10 | 2.40 |
09/04 | 1.78 Bil | 93.55 Mil | 79.69 Mil | 91.85 Mil | 1.71 | 0.30 |
09/03 | 1.63 Bil | 73.77 Mil | 73.71 Mil | 71.96 Mil | 1.42 | 0.80 |
09/02 | 1.31 Bil | 56.70 Mil | 65.28 Mil | 55.37 Mil | 1.12 | 0.60 |
Guidance for 2012 has an EPS of $1.94 and in 2013 is projected to be $2.60. How will APU be able to continue to pay their distribution which is over $3.00 a year? We can look at a comparable stock, Ferrellgas Partners, L.P (FGP). They may be better known to some by the Blue Rhino brand of propane that is sold at many stores across the country. Below is their income statement from the last 10 years.
INCOME STATEMENT: 10-YEAR SUMMARY
DATE | SALES | EBIT | DEPRECIATION | TOTAL NET | EPS | TAX RATE |
07/11 | 2.42 Bil | -42.52 Mil | 82.47 Mil | -43.65 Mil | -0.60 | 0.00 |
07/10 | 2.10 Bil | 35.26 Mil | 82.48 Mil | 32.71 Mil | 0.47 | 5.40 |
07/09 | 2.07 Bil | 55.65 Mil | 82.47 Mil | 52.57 Mil | 0.79 | 4.10 |
07/08 | 2.29 Bil | 25.27 Mil | 85.57 Mil | 24.69 Mil | 0.39 | 0.30 |
07/07 | 1.99 Bil | 41.96 Mil | 87.35 Mil | 34.80 Mil | 0.55 | 15.60 |
07/06 | 1.90 Bil | 29.03 Mil | 84.96 Mil | 25.01 Mil | 0.41 | 12.10 |
07/05 | 1.75 Bil | -13.84 Mil | 84.29 Mil | -15.38 Mil | -0.44 | 0.00 |
07/04 | 1.31 Bil | 20.52 Mil | 57.09 Mil | 20.50 Mil | 0.30 | -2.00 |
07/03 | 1.17 Bil | 53.77 Mil | 40.74 Mil | 52.97 Mil | 1.15 | 0.00 |
07/02 | 1.03 Bil | 60.73 Mil | 41.92 Mil | 59.96 Mil | 1.34 | 0.00 |
FGP has been able to continue to pay a $2.00 a share dividend since 1995. Looking at these numbers, it makes the numbers that AmeriGas has look 10 times better.
Both companies have been buying smaller propane companies and trying to build up their customer base. However, their liabilities have been increasing as much as their assets with long term debt also increasing. Income growth has also been decreasing, and I would expect to see more of the same, with a warm winter in the United States, and people who can swap to natural gas from propane are more likely to do it, based on the extremely cheap prices of natural gas.
Conclusion
What may concern me the most is that AmeriGas missed earnings bad last quarter, and the stock still went up. Future earnings are decreasing as well. Ferrellgas however has fallen since an analyst downgrade in December. Both pay solid distributions (remember they are cash distributions, not dividends, so a K1 is in order), but their balance sheets make me nervous. It may be worth the risk for the high dividends (6.6% for APU, 10.5% for FGP), but I would keep both of these stocks on a tight leash.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
