Ferrellgas Partners: Leveraging Propane Demand and Operational Gains for Long-Term Value

Ferrellgas Partners, L.P. (FER) is positioned to capitalize on rising propane demand while demonstrating operational resilience through cost discipline and strategic investments. As summer approaches, the company's preparations for peak grilling season, coupled with balance sheet improvements, suggest it could deliver outsized returns for investors willing to navigate near-term headwinds. Here's why Ferrellgas is a compelling play on propane demand cycles—and how to position for it.

Revenue Growth and EBITDA Expansion: Signs of Strategic Momentum

Ferrellgas reported a 10% year-over-year revenue surge in its fiscal Q2 2025, driven by higher propane prices and volume gains. Wholesale gallons rose 20%, while retail sales held steady at 1% growth despite 16% warmer weather in key markets. This outperformance underscores the company's ability to navigate seasonal volatility. Meanwhile, Adjusted EBITDA increased 7% to $157 million, fueled by margin improvements (up 3%) and cost controls, including a $2.1 million reduction in general administrative expenses.

The Blue Rhino tank exchange business, a growth engine, delivered record January sales with a 9% jump in gallons sold. Its expansion into 6,000 new selling locations and partnerships with disaster response groups like Operation BBQ Relief (which used Ferrellgas propane to serve 1.4 million meals post-hurricanes) signal strong demand diversification.

Strategic Moves: National Contracts and Acquisitions Fuel Growth

Ferrellgas is leveraging new national accounts—including a Minnesota autogas customer adding 100,000 gallons annually—and strategic acquisitions like Kilhoffer Propane in Oklahoma to secure long-term volume. These moves are critical as the company shifts focus to weather-agnostic markets, such as industrial and commercial propane use, reducing reliance on seasonal heating demand.

The company's operational efficiency gains are equally notable. Telematics technology reduced idling time and cut fleet costs by $0.8 million, while cylinder inventory management lowered skipped delivery stops by 12.6%. These metrics suggest Ferrellgas is optimizing its $1.5 billion asset base to deliver leaner operations, a critical edge in a capital-intensive industry.

Seasonal Trends and Grilling Season Prep: Why Summer Matters

Propane demand typically peaks in summer, driven by grilling, outdoor heating, and emergency preparedness. Ferrellgas is primed to capture this surge: Blue Rhino's EBITDA rose 26% in fiscal 2024 due to grilling season demand, and its 2025 Q2 performance hints at further gains. The company's expansion into coastal markets and partnerships with retailers like Walmart (which now hosts 68,000 Blue Rhino locations) provide a scalable distribution network.

Balance Sheet Resilience: Navigating Debt and Litigation Risks

Ferrellgas' balance sheet faces headwinds, including a $125 million legal settlement tied to the Eddystone litigation, which drove a $146.6 million Q1 net loss. However, the company has extended its credit facility maturity to December 2025, buying time to refinance $308.8 million in debt. While leverage remains elevated (debt-to-equity at ~4.5x), management's focus on free cash flow—enhanced by EBITDA growth and $10 million in annual cost savings from fixed-price programs—suggests improving liquidity.

Investment Thesis: Buy the Dip Ahead of Summer Demand

Ferrellgas' stock trades at a depressed 6.5x EV/EBITDA, reflecting concerns over litigation and seasonal volatility. Yet, its operational discipline—evident in margin expansion and strategic asset-light initiatives—supports a rebound. Investors should consider gradual accumulation ahead of summer, targeting dips below $10 (its 52-week low). Key catalysts include:
- Q3 Earnings: Likely to show peak grilling season results.
- Debt Refinancing Updates: Any extension or reduction in credit facility costs would boost confidence.
- Blue Rhino Expansion: Watch for new partnerships or vending machine rollouts.

Risks to Consider

• Weather Dependency: Unusually mild summer weather could dampen demand.
• Litigation: The Eddystone settlement's final $37.5 million payment is due in June, which could pressure short-term liquidity.
• Commodity Price Volatility: Propane price swings could squeeze margins if not hedged effectively.

Conclusion: A Contrarian Play on Energy Cycles

Ferrellgas is a classic value play for investors willing to bet on propane's cyclical recovery and management's ability to execute on operational improvements. With a robust EBITDA trajectory, strategic growth levers, and a refinanced balance sheet, the company is set to outperform if demand meets expectations. Summer could be the catalyst—position now to capitalize on the rebound.

Investment Rating: Buy on dips below $10, with a 12-month price target of $14.
Risk Rating: High (litigation, weather dependency).
Hold for: 12–18 months, through grilling and winter heating cycles.