Suburban Propane Partners’ Price Target Nudged Up to $25 by Janney

Suburban Propane Partners (SPH) received a slight increase to its price target Wednesday afternoon from Janney Montgomery Scott as the firm updated its financial models to reflect expectations for lower margins and higher volumes through 2019.

The new price target is $25 per share, up from $24. However, the raised target is still below the stock’s Wednesday closing price of $26.20. Janney kept its investment rating on the stock at neutral.

In a note to clients, Janney said the adjustments to its estimates for Suburban Propane Partners come amid higher propane spot pricing, with pricing in Mont Belvieu, Texas having ranged from $0.70 to $.90 per gallon during the calendar quarter ending in September. “We believe this is significantly higher than during the previous quarter 2017 and last year’s September quarter,” the firm said.

Janney said it believes the higher pricing “is reflective of a drawdown of inventory supplies in the propane market as some are expecting a much colder winter in [2018] vs. the last two warmer winters of 2017/2016.” The firm said it believes Suburban Propane Partners’ operational and financial models “are highly sensitive and are set up well to perform for cooler winter weather and potential volume increases if/when cold weather returns for winter.”

The firm also noted it remains “cautious on SPH as we still anticipate the previously discussed potential distribution cut by up to 33% to occur later in October 2017.”

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