Mizuho Securities analyst Gabe Moreen has maintained their bearish stance on SPH stock, giving a Sell rating yesterday.
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Gabe Moreen has given his Sell rating due to a combination of factors impacting Suburban Propane’s recent performance and outlook. The company reported an adjusted EBITDA of $75 million, falling short of both market expectations and Mizuho’s estimates. This underperformance is primarily attributed to lower propane volumes resulting from an unusually warm November, which wasn’t fully compensated by the colder weather in December. Despite some optimism for stronger performance in the following quarter due to sustained colder weather, the inherent volatility of the propane distribution industry, driven by weather sensitivity, remains a concern.
Another factor influencing the Sell rating is the company’s increased leverage, which rose to 4.99x due to higher debt levels taken on for acquisitions and other capital expenditures. While management anticipates leverage reduction through growth investments, the current financial position raises caution. Additionally, although Suburban Propane has begun monetizing production tax credits at its renewable natural gas facilities, the financial benefits are not immediate, and the potential for issuing equity to manage balance sheet risks further weighs on the stock’s outlook.
According to TipRanks, Moreen is a top 100 analyst with an average return of 17.1% and an 80.31% success rate. Moreen covers the Energy sector, focusing on stocks such as Archrock, Kinder Morgan, and Energy Transfer.
In another report released yesterday, Wells Fargo also maintained a Sell rating on the stock with a $17.00 price target.