UGI's EBIT Rises 5% Amid Strategic Divestitures and Safety Gains

Date of Call: Feb 5, 2026

Financials Results

• EPS: $1.26 adjusted diluted EPS, down from $1.37 in the prior year

Business Commentary:

Revenue and EBIT Growth:

• UGI Corporation reported total reportable segments' EBIT of $441 million for the first quarter of fiscal 2026, up 5% over the prior year period.
• This growth was driven by strong performance in natural gas businesses due to robust demand and the impact of the 2025 gas base rate case in Pennsylvania, as well as effective margin management in Global LPG operations.

Operational Excellence and Safety Improvements:

• AmeriGas saw a 45% reduction in recordable incidents and a 60% decrease in lost time injuries compared to the prior year period.
• These improvements were part of a broader focus on operational excellence, safety, and cultural transformation, contributing to better operational efficiency and customer service metrics.

Strategic Divestitures and Portfolio Optimization:

• UGI International completed divestitures of LPG operations in 7 European countries, representing approximately 5% of UGI International's EBIT in the prior year, generating $215 million in cash proceeds.
• This strategic move aimed to strengthen the corporation's balance sheet and focus on markets with the strongest competitive positions and growth opportunities.

Capital Investment and Infrastructure Development:

• UGI deployed $225 million in capital during the quarter, with 73% allocated to regulated utilities businesses for infrastructure replacement and system betterment.
• These investments are part of efforts to capture growing demand in Pennsylvania and maintain reliable natural gas service, supported by a recently filed gas base rate case seeking increases of approximately $99 million and $27 million for UGI Utilities and Mountaineer Gas Company, respectively.

Liquidity and Credit Rating Improvements:

• UGI reported available liquidity of $1.6 billion, up $100 million over the prior year, reflecting progress on balance sheet objectives.
• This was complemented by a credit rating upgrade from Moody's, which affirmed the B1 corporate family rating and upgraded AmeriGas Partners' outlook to positive, recognizing business stabilization and improvement efforts.

Sentiment Analysis:

Overall Tone: Positive

• Management reported a 'solid first quarter' with EBIT up 5% YOY, driven by strong natural gas businesses and margin management. They highlighted 'record safety' and improved customer metrics at AmeriGas, noted a Moody's credit rating upgrade, and expressed confidence in being 'well situated to capture growing demand' in Pennsylvania.

Q&A:

• Question from Gabriel Moreen (Mizuho Securities USA LLC): How has AmeriGas been performing through recent extreme winter weather in terms of deliveries, margins, etc.? Also, has natural gas price volatility benefited the marketing business?
  Response: CEO acknowledged significant system stress in extreme weather areas but highlighted strong overall performance with improved safety, higher Net Promoter Scores, and reduced customer calls. He noted the company can redeploy resources across its large footprint. CFO added that colder weather typically benefits the midstream marketing business but is managed with attention to utility capacity needs.

• Question from Gabriel Moreen (Mizuho Securities USA LLC): Why file for a rate case in Pennsylvania relatively quickly, and are there any structural requests like trackers?
  Response: CEO stated the rate case is focused on CapEx for infrastructure safety and maintaining affordability, with the company already below many peers in Pennsylvania on affordability. He emphasized OpEx efficiency efforts benefit customers and there are no extraordinary or structural elements in the case.

• Question from Gabriel Moreen (Mizuho Securities USA LLC): What is the status of positioning for increasing natural gas demand in PA and progress on NDAs?
  Response: CEO said discussions are progressing well with power providers and data centers, with hopes to announce agreements during the fiscal year. He noted recent White House directives on emergency power procurement as an added benefit.

• Question from Paul Zimbardo (Jefferies LLC): Why create a Chief Strategic Officer role now, and what are its mandates?
  Response: CEO explained the role is a natural evolution to focus on medium- and long-term strategy, including building a sustainable future, portfolio opportunities, and external issues like regulation, while he continues to focus on day-to-day operations.

• Question from Paul Zimbardo (Jefferies LLC): Can you quantify the pipeline transportation cost lag in the midstream business and will it create a tailwind?
  Response: CFO stated the rate increase was about $5 million, is anticipated in the budget, and will be recovered starting this year, with a significant portion recovered in fiscal 2026.

Contradiction Point 1

Growth Outlook and Pennsylvania NDA Progress

Statements about the pace and certainty of project agreements in Pennsylvania conflict.

How is UGI addressing growing natural gas demand in Pennsylvania and advancing NDAs? - Gabriel Moreen (Mizuho Securities USA LLC)

2026Q1: We hope to announce agreements during the fiscal year. UGI is engaged in significant discussions but cannot move faster than its development partners. - Robert Flexon(CEO)

What are expectations for growth in midstream and LPG businesses over the next five years, what is the current status of activity in Pennsylvania (data center/NDA), and are there any updates on media reports regarding the potential sale of the electric utility? - Gabriel Moreen (Mizuho Securities USA LLC)

2025Q4: There is significant ongoing activity in Pennsylvania, with over 50 NDAs signed with counterparties for potential projects. Discussions are advanced with various interested parties, and the company is focused on capitalizing on regional energy expansion. - Robert Flexon(CEO)

Contradiction Point 2

AmeriGas Leverage Target Path

The stated primary driver for achieving the leverage target appears to have shifted.

How will AmeriGas achieve its sub-4x leverage target—through deleveraging or EBITDA improvement—and what is the timeline? Additionally, can you clarify the consistency of future results excluding tax credits and the relationship between CapEx shifts and increased shareholder returns? - Julien Dumoulin-Smith (Jefferies LLC)

2026Q1: The path to sub-4x leverage... will be driven by both operational improvements (growing EBIT) and further debt reduction. - Robert Flexon(CEO), Sean O'Brien(CFO)

How will AmeriGas achieve its sub-4x leverage target—through deleveraging or EBITDA growth—and what is the timeline? Can you clarify the consistency of future results excluding tax credits and how CapEx shifts align with increased shareholder returns? - Julien Dumoulin-Smith (Jefferies LLC)

2025Q4: The path to sub-4x leverage (targeting ~4.5x in 2026) will be driven by operational improvements (growing EBIT) and further debt reduction. - Robert Flexon(CEO), Sean O'Brien(CFO)

Contradiction Point 3

Strategic Divestiture Program Completeness

Contradiction on whether the company has finished its divestiture program or plans further actions.

How significant is the lag in midstream pipeline transportation cost recovery and its potential tailwind for the fiscal year? - Paul Zimbardo (Jefferies LLC)

2026Q1: The company is focused on exiting the wholesale business and high-grading the customer base. The goal is to simplify the business and focus on highest-value customers. No explicit statement on whether further divestitures are planned... - Robert Flexon(CEO)

Is the LPG strategic divestiture program complete, or are there more divestitures planned? - Gabriel Philip Moreen (Mizuho Securities USA LLC)

2025Q3: The company is focused on exiting the wholesale business (a ~11% gallon segment that was essentially breakeven) and high-grading the customer base. The goal is to simplify the business and focus on highest-value customers. No explicit statement on whether further divestitures are planned, but the focus is on optimizing the portfolio. - Robert Flexon(CEO)

Contradiction Point 4

Timeline for Recovery of Pipeline Transportation Costs

Contradiction on the timing lag for recovering a pipeline rate increase.

Can you quantify the delay in pipeline transportation cost recovery in the midstream business and its potential tailwind for the fiscal year? - Paul Zimbardo (Jefferies LLC)

2026Q1: The pipeline rate increase was approximately $5 million. While it was included in the budget, there is a timing lag to recovery. A significant portion is expected to be recovered in fiscal 2026, starting this year. - Sean O’Brien(CFO)

Will the benefit from the One Big Beautiful Bill Act involve bonus depreciation on regulated activities or 45Zs on RNG? - Paul Andrew Zimbardo (Jefferies)

2025Q3: The main impact is a retroactive removal of valuation allowances... This benefit will also apply going forward. - Sean P. O’Brien(CFO)

Contradiction Point 5

AmeriGas Performance and Future Outlook

Contradiction on the level of investment and process improvements needed for AmeriGas.

How has AmeriGas performed through recent extreme winter weather in terms of deliveries and margins, and has natural gas price volatility benefited the marketing business? - Gabriel Moreen (Mizuho Securities USA LLC)

2026Q1: AmeriGas showed significant improvement with record safety metrics... and a 17% reduction in customer service calls. - Robert Flexon(CEO)

What are the key learnings from the winter and the targets for AmeriGas in the upcoming fiscal year, and what is the current status of refinancing the 2026 maturities? - Gabriel Moreen (Mizuho)

2025Q2: Focused on enhancing business processes with minimal investment for significant returns... Expect a stronger, more efficient AmeriGas for the next winter. - Bob Flexon(CEO)