UGI Needs To Rebuild Cash Generating Subsidiaries, Says Analyst

Mizuho Securities analyst Gabriel Moreen initiated coverage on UGI Corp UGI at Neutral with a price target of $38.
The analyst sees favorable development at UGI's renewables projects as a growth driver.
The analyst expects UGI to witness weakness in its Global LPG businesses (AmeriGas and UGI International) in the medium-term, with expected softer margins (~50% vs upper-50% to low-60% recent range).
The analyst believes UGI will incur higher capital expenditure in order to achieve rebuilding of cash flow generating subsidiaries.
Moreen also expects acquisition spending of $100 million annually to tackle customer attrition and lower volumes.
The analyst is expecting -3.5% CAGR earnings decline from FY22-FY26 and projects AmeriGas business to achieve an 8% CAGR earnings target by FY26 (Mizuho estimates of 8.5% CAGR).
The analyst expects FCF of $0.1 billion vs. UGI's expectation of $(0.4) billion - $0.2 billion for FY23-FY26.
Price Action: UGI shares are trading lower by 2.04% at $33.21 on the last check Wednesday.

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