Suburban Propane Partners L.P.SPH

Morningstar Rating

Stock Research and Analysis

by Mark Barnett

Suburban Propane Partners generates substantial value from its lucrative propane distribution business. However, its other business segments aren't nearly as attractive.

Suburban's propane customers have little incentive to switch, either to other Read more

Bulls Say

Suburban's cost-cutting should boost distributable cash flows, leaving room for distribution increases.

A significant portion of Suburban's propane customers lease their tanks from the company. This makes the switching costs for current customers relatively high.

Suburban has shifted its attention to more-profitable customer segments, which should boost margins in the long run.

Suburban's general partner's interests are fully aligned with common unitholders' after the completion of the exchange transaction.

The fuel oil segment is showing new life as management has "fired" its least profitable customers. Read more

Bears Say

With the dramatic cost cuts, Suburban's customer service may suffer, especially in cold weather. Lower service quality may prompt some customers to defect.

Major operating disruptions could cause a liquidity crunch that prevents opportunistic acquisitions and distribution increases.

Suburban's coverage ratio can dip if volumes decrease dramatically or if the firm fails to insulate itself against commodity-price risk.

High commodity prices and warm weather lead to lower sales volume and more uncollectible customer debt.

Owning a master limited partnership presents unique tax implications. Investors should consider consulting a tax advisor before buying Suburban Propane or other MLPs. Read more

Strategy

Suburban's strategy is to focus internally on customer service and operating efficiency and externally on selective acquisitions and dispositions. It is also eliminating lower-margin customers and scaling Read more

Management

A five-member board of supervisors oversees Suburban. Mark Alexander has been CEO since 1996. Michael Dunn was promoted to president in May 2005 from senior vice president of corporate development. In 2008, Alexander earned $1.1 million, most of which Read more

Profile

Suburban Propane Partners distributes propane, fuel oil, and other refined fuels to about 1 million customers primarily in the East Coast and West Coast regions of the United Read more

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