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Suburban Propane Partners LP (SPH) stock has gone into a strong uptrend after reporting sales growth of 80% and net income growth of 230%.
With the climbing price of propane, propane companies are pulling in the big bucks.
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Suburban Propane Partners, L.P. Announces Second Quarter Results
On May 5, 2022, Suburban Propane Partners, L.P. (NYSE:SPH), announced earnings for its second quarter ended March 26, 2022.
Net income for the second quarter of fiscal 2022 was $175.1 million, or $2.77 per Common Unit, compared to $127.2 million, or $2.03 per Common Unit, in the fiscal 2021 second quarter. Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA, as defined and reconciled below) increased $0.5 million, or 0.3%, to $172.5 million for the second quarter of fiscal 2022, compared to $172.0 million in the prior year.
In announcing these results, President and Chief Executive Officer Michael A. Stivala said, “The fiscal 2022 second quarter was another outstanding quarter for Suburban Propane — delivering solid operating results, making progress on the execution of our long-term strategic initiatives and continuing to improve our financial metrics. Despite a challenging operating environment resulting from an erratic weather pattern, historically high commodity prices and inflationary factors impacting expenses, we were able to expand our customer base, and effectively manage margins and expenses to deliver an improvement in Adjusted EBITDA compared to the prior year second quarter, and a $7.0 million, or 2.8%, increase for the first six months of the fiscal year. Additionally, in support of our long-term strategic growth plans, we further strengthened our balance sheet by reducing total debt by nearly $42.0 million during the second quarter.”
Mr. Stivala continued, “In addition to the improvement in earnings and leverage metrics, we took several steps to advance our Go Green with Suburban Propane corporate pillar, starting with the creation of our new subsidiary, Suburban Renewable Energy, LLC, to serve as the platform for our investments in innovative, renewable energy technologies and businesses. During March 2022, we acquired a 25% equity stake in Independence Hydrogen, Inc., a veteran-owned and operated start-up company developing a gaseous hydrogen ecosystem, for $30.0 million. We also made additional investments in Oberon Fuels, to support the commercialization of renewable dimethyl ether (rDME) as a blend with propane; including our construction of the world’s first commercial Propane+rDME blending facility in our Placentia, California location. We are continuing to position the business, both operationally and financially, for long-term growth and sustainability, and to support the energy transition to a lower carbon future.”
Retail propane gallons sold in the second quarter of fiscal 2022 of 159.2 million gallons decreased 5.8% compared to the prior year, primarily due to elevated customer tank levels coming into the quarter given the impact of near record warm temperatures during the month of December 2021, unseasonably warm and inconsistent temperatures throughout the second quarter, and customer conservation stemming from the high commodity price environment. According to the National Oceanic and Atmospheric Administration, average temperatures (as measured by heating degree days) across all of the Partnership’s service territories during the second quarter were 7% warmer than normal and similar to the prior year second quarter.
Average propane prices (basis Mont Belvieu, Texas) for the second quarter of fiscal 2022 increased 44.5% compared to the prior year, and 4.7% compared to the prior sequential quarter. Total gross margin for the second quarter of fiscal 2022 was $349.1 million, compared to $305.7 million in the prior year. Gross margin for the second quarter of fiscal 2022 included a $33.0 million unrealized gain attributable to the mark-to-market adjustment for derivative instruments used in risk management activities, compared to a $1.6 million unrealized gain in the prior year. These non-cash adjustments, which were reported in cost of products sold, were excluded from Adjusted EBITDA for both periods. Excluding the impact of the unrealized mark-to-market adjustments, total gross margin of $316.1 million for the second quarter of fiscal 2022 increased $12.0 million, or 4.0%, compared to the prior year, primarily due to prudent margin management during a rising and volatile commodity price environment, as well as from the favorable impact of commodity hedges that matured during the period. The Partnership’s hedging and risk management activities are intended to reduce the effect of price volatility associated with forecasted purchases of propane, including propane sold on a fixed price basis. The commodity hedges that matured during the second quarter of fiscal 2022 were principally comprised of net long positions that were favorably impacted from the significant rise in commodity prices.
Combined operating and general and administrative expenses of $143.0 million for the second quarter of fiscal 2022 increased 9.1% compared to the prior year, primarily due to higher payroll and benefit-related expenses, higher vehicle lease and fuel costs, higher provisions for doubtful accounts, as well as other inflationary effects on the Partnership’s operating costs.
During the second quarter of fiscal 2022, the Partnership utilized cash flows from operating activities to repay $41.9 million in debt, purchase a 25% equity stake in Independence Hydrogen for $30.0 million, and make additional investments in Oberon Fuels in support of the Partnership’s long-term strategic goal of building out a renewable energy platform. As a result of the debt repayment and the increase in Adjusted EBITDA during the second quarter, the Consolidated Leverage Ratio, as defined in the Partnership’s credit agreement, for the trailing twelve-month period ending March 26, 2022 improved to 3.87x.
As previously announced on April 21, 2022, the Partnership’s Board of Supervisors declared a quarterly distribution of $0.325 per Common Unit for the three months ended March 26, 2022. On an annualized basis, this distribution rate equates to $1.30 per Common Unit. The distribution is payable on May 10, 2022 to Common Unitholders of record as of May 3, 2022.
Suburban Propane Partners, L.P. is a publicly traded master limited partnership listed on the New York Stock Exchange. Headquartered in Whippany, New Jersey, Suburban Propane has been in the customer service business since 1928 and is a nationwide distributor of propane, renewable propane, fuel oil and related products and services, as well as a marketer of natural gas and electricity and an investor in low carbon fuel alternatives, servicing the energy needs of approximately 1 million residential, commercial, governmental, industrial and agricultural customers through approximately 700 locations across 42 states.
📉 SPH Stock Technical Analysis
SPH stock trades just below its 52-week high resistance at $17.75. The next pivot point is 2nd level resistance at $17.93. At this pivot point, the 3-10 day MACD Oscillator stalled out last time so this is a major resistance level to watch.
The major support level pivot point is $17.31 and a 38.2% retracement from the 4-week high is at $17.06.
