The case for & against
Bull & Bear analysis
Bearish
Star Group L.P. (NYSE: SGU) is a leading player in the home heating oil and propane distribution sector, primarily serving residential and commercial customers in the Northeastern United States. The company also provides HVAC services and is actively engaged in enhancing its market presence through strategic acquisitions. As part of the energy distribution value chain, Star Group is uniquely positioned to benefit from seasonal fluctuations in energy demand, driven by colder weather, making its business model highly sensitive to weather conditions.
Bull says
- ↑Adjusted EBITDA of $139M (+8.2% YoY) powered by colder weather
- ↑Product gross profit reached $277M, up 7% YoY on margin gains
- ↑Customer attrition at 0.6% reflects strong retention
- ↑Acquisitions drove volume growth, offsetting attrition headwinds
- ↑Secured $12.5M weather hedge for fiscal 2027 to protect margins
- ↑High earnings yield and favorable book-to-price suggest undervaluation
Bear says
- ↓Operating expenses climbed $16M YoY from extreme weather-driven delivery costs
- ↓Warm winters in prior periods caused volume declines, increasing revenue swings
- ↓Potential fossil fuel regulations in New York may limit growth
- ↓Elevated interest rates could raise borrowing costs and reduce financial flexibility
- ↓Low liquidity and weak momentum factors signal trading risks
- ↓Limited institutional backing and modest dividend yield may deter investors
Earnings Call · Q2 2026 · Mgmt. Guidance
Updated 05-12-2026neutral
Transcript signals
Bull points
- For the second quarter, our home heating oil and propane volume rose by 600,000 gallons, or four-tenths of 1%, so 144.5 million gallons, as the additional volume provided from acquisitions and colder weather more than offset the impact of net customer attrition and other factors.
- Our product gross profit increased by $19 million, or 7%, to $277 million due to a slight increase in home heating oil and propane volume sold and higher home heating oil and propane per gallon margins.
- We posted net income of $108 million in the second quarter of fiscal 2026, or $22 million more than the prior year period, reflecting a $10.5 million increase in adjusted EBITDA and the impact of a non-cash favorable change in the fair value of derivative instruments of $21 million, more than offsetting higher income tax expense of about $10 million and certain other factors.
Bear points
- Colder weather conditions and numerous snowstorms increased the demand for service, which led to higher service-related expenses, including greater labor and other costs, which increased our service loss by $3.4 million.
- colder weather conditions and numerous snowstorms in the second quarter of fiscal 2026 increased the demand for service, which led to higher service-related expenses.
- the service gross loss rose by 6.1, again, due to higher expenses and an increased demand for service, as well as an increase in propane tank sets.
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