UGI Q3 Earnings Call Highlights

Key Points

• UGI reaffirmed fiscal 2026 adjusted EPS guidance of $2.75–$2.90, despite third-quarter segment EBIT falling to $58 million from $72 million due largely to warmer weather and weaker AmeriGas propane volumes.
• UGI’s Utilities and Midstream businesses posted improved results, while a proposed Pennsylvania rate settlement could provide approximately $65 million in two-step rate increases in 2026 and 2027.
• AmeriGas EBIT declined $25 million as retail propane gallons fell 10%, but management expects more than $100 million in fiscal 2026 free cash flow and highlighted significant safety and customer-service improvements. UGI also reduced AmeriGas net debt by about $270 million and lowered leverage to 4.3 times.

UGI NYSE: UGI reported fiscal 2026 third-quarter reportable segment EBIT of $58 million, down from $72 million a year earlier, as warmer weather and lower retail propane volumes at AmeriGas weighed on results. The company said year-to-date reportable segment EBIT increased modestly to $1.187 billion, up $3 million from the prior-year period.

President and CEO Bob Flexon said the company’s operating performance had absorbed the effects of LPG divestitures, unfavorable weather and slower domestic propane growth. UGI estimated that weather created an approximately $0.05 per-share headwind compared with the prior year and a $0.11 headwind compared with normal weather patterns.

Year-to-date adjusted diluted earnings per share were $3.17, compared with $3.55 in the prior-year period. CFO Sean O’Brien said the decline largely reflected the absence of investment tax credits recognized last year and higher interest expense. UGI reaffirmed its fiscal 2026 adjusted diluted EPS guidance range of $2.75 to $2.90.

Utilities and Midstream Results

UGI’s Utilities segment posted a $10 million year-over-year increase in third-quarter EBIT, supported by higher gas base rates that became effective in October 2025. Those gains were partly offset by higher depreciation and amortization expenses associated with pipeline replacement investments.

During the year, UGI directed about 76% of capital expenditures toward its natural gas businesses and added more than 8,500 new heating customers across its regulated utility territories. Flexon said the company completed its cast iron replacement commitment several months ahead of schedule.

On July 31, administrative law judges recommended approval without modification of UGI Utilities’ joint settlement petition for its gas rate case. If approved by the Pennsylvania Public Utility Commission, the agreement would allow a two-step $65 million rate increase, including approximately $40 million in October 2026 and about $25 million in October 2027. The settlement includes a stay-out provision through January 2029.

The proposed settlement also includes a pilot program intended to provide debt relief to customers earning between 150% and 300% of the federal poverty level. UGI said it will also ensure that at least $1.5 million annually is available for Operation Share, a customer-assistance program.

Midstream and Marketing EBIT rose $3 million in the quarter. Total margin increased $13 million, primarily due to the timing of capacity margin and recovery of higher pipeline costs. Operating and administrative expenses increased $8 million, largely because LNG and renewable-energy projects entered service last year.

Management said it sees additional Appalachian production opportunities, with one well-pad expansion expected to begin early in fiscal 2027 and another planned for later in the year. The company also expects its FERC-regulated Auburn pipeline project toward the end of fiscal 2027. Flexon cited prospective power-generation and data-center demand as longer-term growth drivers for the midstream business.

AmeriGas Pressured by Weather and Attrition

AmeriGas recorded a $25 million year-over-year decline in third-quarter EBIT. Retail propane gallons fell 10%, reflecting April temperatures that were 16% warmer than the prior year as well as ongoing customer attrition. Lower fee income also contributed to the decline.

Excluding the Hawaii divestiture and adjusting for weather, AmeriGas retail gallons declined 6% in the quarter and were down 2% year to date, according to the company. Flexon said customer attrition was about 2% year to date, which he described as the lowest level in a long time.

Management highlighted several operational indicators at AmeriGas compared with fiscal 2024:

• Lost-time injuries decreased 50%.
• Recordable injuries declined 44%.
• Out-of-gas events fell 21%.
• Zero fills decreased 17%.
• Average Net Promoter Score increased 63%.

Flexon said AmeriGas has returned its call centers to the U.S. and is increasing sales and marketing activity, expanding sales channels and targeting residential and business-to-business customers. The company is aiming to move from net customer attrition to net growth during the upcoming winter heating season.

O’Brien said AmeriGas is expected to generate more than $100 million of free cash flow in fiscal 2026, which UGI intends to use for another year of deleveraging. He said management expects the business to be positioned for meaningful cash distributions to UGI’s parent company in fiscal 2027, subject to its outlook and weather conditions.

International LPG and Balance Sheet Actions

UGI International generated third-quarter EBIT of $41 million, compared with $43 million a year earlier. Retail volumes declined 10%, primarily due to LPG divestitures in Austria and Eastern Europe. Lower volumes reduced total margin by $6 million, though higher average unit margins and stronger foreign currencies partly offset the impact.

Flexon said UGI International delivered a 23% EBITA margin year to date and has opportunities to grow through conversions from heating oil to LPG. He said the heating-oil market is roughly four times the size of the addressable LPG market. Management also pointed to a recently announced European take-private transaction involving a primary competitor as evidence of the value of its international platform, while reiterating that it continues to evaluate its portfolio for shareholder-value opportunities.

UGI completed debt transactions at AmeriGas, UGI International and UGI Energy Services during the year, extending maturities and reducing annualized borrowing costs by approximately $30 million. At AmeriGas, the company issued debt at 6.875% and used proceeds to address 2027 maturities and a portion of 2028 senior notes carrying a 9.375% coupon.

The company said AmeriGas net debt declined approximately $270 million from the prior quarter. UGI ended the quarter with consolidated leverage of 3.8 times and AmeriGas leverage of 4.3 times, which O’Brien said was the lowest level at AmeriGas in 10 years.

About UGI (NYSE:UGI)

UGI Corporation NYSE: UGI is a publicly traded energy distribution company headquartered in King of Prussia, Pennsylvania. Founded in 1882 as the United Gas Improvement Company, UGI has grown into a diversified provider of energy products and services. The company's operations are organized into three primary segments—AmeriGas Propane, UGI Utilities and UGI International—each focused on the delivery of propane, natural gas and related services to residential, commercial and industrial customers.

AmeriGas Propane, UGI's largest segment, is the leading retail propane distributor in the United States with a network of dealers serving customers in all 50 states.

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