UGIC - UGI Corporation: Dashed Expectations Create Buy Opportunity
2024-02-01 12:14:09 ET
Summary
- UGI Corporation is a beaten-down stock with a dividend yield of 6.8% and manageable debt levels.
- Poor sentiment following high expectations not being met has contributed to the stock's underperformance.
- The company's historical performance and potential interest rate cuts in 2024 suggest that the stock is undervalued.
Investment Thesis
As I undertook research for this article, I had to keep asking myself why UGI Corporation ( UGIC ) ( UGI ) is such a beaten down stock. It's a dividend aristocrat with a dividend yield of 6.8%, comfortably covered by earnings, with a manageable debt level. Even the Jan. 31 post market announcement of a December quarter non-GAAP EPS of $1.20, a beat of $0.17, has not been enough to lift the share price. In fact, as I write this, the share price pre-market open on Feb. 1, is $22.71, still below last Friday's closing price of $23.17. While my emphasis in stock analysis is primarily on fundamentals, I recognize sentiment plays a very big part in share price formation, and sentiment should not be ignored. It's one of the things I like about SA Quant. Quant may refer to quantitative analysis, which has connotations of fundamental analysis. But I have come to recognize that SA Quant quantifies measures involving sentiment as well as fundamentals. Investors can be spooked by downward revisions of earnings estimates and a falling share price, and buoyed by upward revisions and a rising share price. So earnings revisions and price momentum are key measures in SA Quant analysis. Figure 1 below shows UGI's ratings pre and post the earnings call....
UGI Corporation: Dashed Expectations Create Buy Opportunity