EUR 850.00 For Business Accounts Only

Morningstar | No-Moat AmeriGas Reports Full-Year Results

We are reaffirming our $41 fair value estimate and no-moat and negative moat trend ratings for AmeriGas Partners after the partnership reported fiscal 2018 adjusted EBITDA of $605.5 million compared with $551.3 million in the same year-ago period. These results were in line with our estimates. Management initiated fiscal 2019 adjusted EBITDA guidance of $610 million-$650 million based on normal weather but excluding any planned acquisitions.

We recently reduced our fair value estimate by $5 per unit. We lowered our per-gallon gross profit expectations as we think it will be harder to maintain and increase margins in an industry with numerous headwinds. For these same reasons, we lowered our stage II expectations for return on invested capital and EBI growth. We think this is supported by a 19% increase in the average propane price during the year, increasing the incentive for customers to switch to cheaper natural gas where available.

Overall, temperatures in the year were 13% colder than normal, but retail volumes were up only 4%. Retail margins were approximately flat year over year. The company's smaller cylinder exchange and national account volumes continue to be a growth area for the company, increasing 4% and 11%, respectively, year to date. During the year, management acquired 3 million gallons, below our expectations, suggesting to us that the number of attractive acquisition candidates may be declining. We continue to incorporate minimal distribution growth in our outlook.