On Wednesday, Mizuho Securities adjusted its outlook on UGI Corporation (NYSE:UGI) shares, raising the price target to $27 from the previous $26, while keeping a Neutral rating on the stock.
The firm anticipates significant disclosures during UGI's second fiscal quarter of 2024 (F2Q24) earnings report concerning the company's strategic review. The expectation is that investors will be keenly interested in two main areas: the F2Q24 performance, which is likely to be subdued due to warmer weather conditions in UGI's service regions, and the future of AmeriGas.
Despite the potential for lower earnings, strong performance in the first quarter might enable UGI to maintain its full-year 2024 earnings per share (EPS) guidance, although it may be at the lower end of the spectrum.
Mizuho also foresees that UGI will continue to own AmeriGas and may adjust its long-term EPS growth targets downward while still preserving its current dividend policy. This outlook is set against a backdrop of anticipated share price volatility, with the firm expressing that it would be surprised if the forthcoming F2Q24 update provides a clear direction favoring either optimistic or pessimistic investors.
The price target adjustment reflects a valuation shift to the fiscal year 2026. However, Mizuho's neutral position is based on the current lack of clarity in bridging the sum-of-the-parts (SOTP) valuation gap. The SOTP approach is a method of valuing a company by determining what its aggregate divisions would be worth if they were spun off or sold.
In conclusion, while the price target for UGI has been modestly increased, Mizuho maintains a cautious stance due to the uncertainties surrounding the company's strategic review outcomes and the potential impact on its stock valuation.
InvestingPro Insights
Following Mizuho Securities' updated outlook on UGI Corporation, real-time data and insights from InvestingPro provide additional context for investors considering UGI's stock. With a market capitalization of $4.84 billion and a notable dividend yield of 6.05%, UGI stands out for its commitment to shareholder returns. The company has a strong history of dividend reliability, having raised its dividend for 31 consecutive years and maintained payments for an impressive 54 years. These factors are particularly relevant for income-focused investors and underscore the firm's financial discipline.
While the company's revenue has seen a decline of 18.66% over the last twelve months as of Q1 2024, analysts are predicting a return to profitability this year, which could signal a potential turnaround in financial performance. Additionally, UGI's current share price is at approximately 69.89% of its 52-week high, with a recent price uptick indicated by a 2.99% one-month total return, suggesting some investor optimism in the short term.
For those seeking more in-depth analysis, InvestingPro offers additional InvestingPro Tips on UGI, such as insights into valuation implications and future income growth prospects. To explore these further, visit https://www.investing.com/pro/UGI. Moreover, interested investors can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking even more valuable insights to inform their investment decisions. With a total of 8 additional InvestingPro Tips available, there is ample expert guidance for evaluating UGI's potential in the market.
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