UGI Benefits From Renewable Investments & Expanding Customer Base

UGI Corporation UGI is expanding operations through strategic acquisitions, which should drive its performance. The company is also benefiting from its initiative to develop a portfolio of renewables through strategic investments in committed projects.

However, this Zacks Rank #3 (Hold) company faces competition from other clean sources and risks related to the seasonality of its business.

Factors Acting in Favor of UGI

UGI continues to make systematic capital investments to address various capital projects, increase the safety and reliability of natural gas production and storage facilities, and replace aging infrastructure to modernize the system. These additions and upgrades allow it to serve the expanding customer base efficiently. The company has added more than 9,000 residential heating and commercial customers year to date at the Utilities.

The company plans to invest $800-$900 million in fiscal 2025 to strengthen its operations, and $3.7-$4.1 billion through fiscal 2027. These investments will assist it in achieving the long-term annual earnings per share growth target in the range of 4-6%.

UGI aims to expand renewable products and support the aim of growing in an environmentally friendly way. It should also boost the company’s overall performance. Global Clean Energy Holdings has teamed up with UGI to supply renewable liquefied petroleum gas in California. The collaboration will utilize AmeriGas, UGI’s subsidiary, leveraging its established infrastructure and customer network for fuel distribution.

Challenges Faced by UGI

UGI's energy products and services face competition from other energy sources, some of which are cheaper for an equivalent energy value. Furthermore, the impact of alternative energy development on UGI’s operations cannot be predicted.

UGI’s business is seasonal. The company’s results are significantly influenced by temperatures in its service territories, particularly during the heating season. A decrease in the demand for energy products and services because of warmer-than-normal temperatures during winters might lower its profitability.

UGI’s Stock Price Performance

In the past year, shares of the company have risen 45% compared with the industry’s 5.2% growth.

Stocks to Consider

Some better-ranked stocks from the same sector are Northwest Natural NWN, Sempra Energy SRE and NiSource NI, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for NWN’s 2025 earnings per share (EPS) is pinned at $2.92, indicating a year-over-year increase of 25.3%. It delivered an average earnings surprise of 33.2% in the last four quarters. 

SRE’s long-term (three to five year) earnings growth rate is 7.01%. The Zacks Consensus Estimate for 2025 sales is pinned at $15.86 billion, indicating a year-over-year increase of 20.3%.

NI’s long-term earnings growth rate is 7.88%. The Zacks Consensus Estimate for NI’s 2025 EPS is pinned at $1.88, indicating a year-over-year increase of 7.4%.

 

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This article originally published on Zacks Investment Research (zacks.com).

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