Ferrellgas Partners (FGP): What's In Store For Q3 Earnings?

Leading distributor of propane in the U.S., Ferrellgas Partners LP (NYSE:FGP) is scheduled to report third-quarter fiscal 2016 results on Jun 8, after the market closes. Last quarter, the partnership reported a negative earnings surprise of 32.56%. Let’s see how things are shaping up for this quarter.

Factors to Consider

Milder-than-usual temperatures result in lower propane usage and therefore hurt revenues. Warmer temperatures during the last winter hurt sales volume for the partnership in the fiscal second quarter – a trend that is likely to continue in the to-be-reported quarter as well. Intensifying competition and operational risks are other causes of concern for the partnership.

On the bright side, the partnership continues to expect the acquired assets of Bridger Logistics to generate $100 million in adjusted earnings before interest, tax, depreciation & amortization (EBITDA) in fiscal 2016. Last quarter, it contributed $28.7 million in adjusted EBITDA.

Surprise History

The above chart indicates that Ferrellgas Partners generated negative earnings surprises in all of the last four quarters. The average negative surprise was 122.59%.

Earnings Whispers

Our proven model does not conclusively show that Ferrellgas Partners will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. This is because the Most Accurate Estimate stands in line with the Zacks Consensus Estimate of 55 cents.

Zacks Rank: Though Ferrellgas Partners’ Zacks Rank #3 increases the predictive power of ESP, the partnership’s 0.00% ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Ranks #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Peer Releases

CVR Refining, LP (NYSE:CVRR) reported first-quarter 2016 loss of 46 cents per share, narrower than the Zacks Consensus Estimate of a loss of 57 cents.

Midcoast Energy Partners, L.P. (NYSE:MEP) reported first quarter 2016 loss of 12 cents per share, narrower than the Zacks Consensus Estimate of a loss of 39 cents.

Genesis Energy LP (NYSE:GEL) reported first quarter 2016 earnings of $1.32 per share lagging the Zacks Consensus Estimate of $2.48 by 46.8%.