Why AmeriGas Partners (APU) Stock Is Down Today

NEW YORK (TheStreet) -- AmeriGas Partners (APU) stock is falling Thursday after pricing its previously-announced underwritten offering of 8.5 million shares of common stock for $45.80 per unit. Selling stockholder Heritage ETC will receive all proceeds. Underwriters have also been granted a greenshoe option to purchase up to approximately 1.2 million shares.

The offering is expected to close June 17. Citigroup, Morgan Stanley, UBS, Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, RBC Capital Markets and Wells Fargo Securities are acting as joint book-running managers. Ladenburg Thalmann is acting as co-manager.

By midmorning, shares had dropped 5.7% to $44.90. Trading volume of 4.3 million was 15 times its three-month daily average. 

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Separately, TheStreet Ratings team rates AMERIGAS PARTNERS -LP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate AMERIGAS PARTNERS -LP (APU) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, robust revenue growth, notable return on equity, expanding profit margins and increase in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • AMERIGAS PARTNERS -LP has improved earnings per share by 9.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, AMERIGAS PARTNERS -LP turned its bottom line around by earning $1.43 versus -$0.05 in the prior year. This year, the market expects an improvement in earnings ($2.92 versus $1.43).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 36.0%. Since the same quarter one year prior, revenues rose by 27.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Gas Utilities industry and the overall market, AMERIGAS PARTNERS -LP's return on equity exceeds that of both the industry average and the S&P 500.
  • 40.64% is the gross profit margin for AMERIGAS PARTNERS -LP which we consider to be strong. Regardless of APU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, APU's net profit margin of 16.07% compares favorably to the industry average.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
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