STAR GROUP, L.P. (SGU)·Q2 2025 Earnings Summary

Executive Summary

• SGU delivered a strong Q2: revenue rose 11.6% year over year to $743.0M, net income increased 25.6% to $85.9M, and Adjusted EBITDA climbed 33% to $128.2M, driven by colder weather, acquisitions, and improved per‑gallon margins .
• Sequentially, revenue and profitability inflected sharply versus Q1 as colder temperatures boosted volumes; EPS rose from $0.79 to $2.01 per LP unit .
• The Board raised the quarterly distribution to $0.185 per unit (annualized $0.74), marking the 13th consecutive annual increase; management also set ~$15M of weather hedges for FY26, and indicated the buyback program is unchanged .
• Key narrative drivers: weather tailwind vs last year offset by weather‑hedge expense (Q2 expense $3.1M vs prior‑year credit $6.5M), continued acquisition activity ($126.5M since Feb 1, 2024), and improving service/installation profitability .
• Street consensus appears unavailable for Q2 2025 (S&P Global shows no active EPS or revenue consensus); therefore, formal beat/miss vs estimates cannot be assessed. Values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

• Volume growth: home heating oil and propane gallons up nearly 23% YoY to 143.9M on colder weather and acquisitions; product gross profit increased by $52M to ~$258M .
• Margin and EBITDA expansion: higher per‑gallon margins and service/installation improvement lifted Adjusted EBITDA to $128.2M (+$31.9M YoY) despite the hedge headwind; CEO: “This led to a nearly 23 percent volume increase…” .
• Capital returns: distribution raised to $0.185, annualized to $0.74; management reiterated focus on shareholder value and operational efficiency .

What Went Wrong

• Weather hedge headwind: Q2 recorded a $3.1M expense vs a $6.5M credit last year, a $9.6M negative YoY impact .
• Operating expenses rose: delivery/branch and G&A increased by $22M YoY in Q2, with ~$7M from acquisitions and ~$9.6M from hedge dynamics .
• Ongoing customer attrition: management noted net customer attrition persists, with prior year FY attrition at 4.2%; Q1 gains were sluggish amid warmer‑than‑normal conditions .

Financial Results

YoY Comparison (Q2 2024 vs Q2 2025)

Sequential Comparison (Q1 2025 vs Q2 2025)

Segment Sales Breakdown (Q2 2024 vs Q2 2025)

KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO (press release): “This led to a nearly 23 percent volume increase in home heating oil and propane versus the prior-year period… we’ve completed $126.5 million of acquisitions… we recently raised our annual dividend by 5 cents, to 74 cents per unit.” .
• CEO (call): “Our performance this quarter was positively impacted by recent acquisitions and weather… a $32 million improvement in adjusted EBITDA versus the prior year period.” .
• CFO (call): “Delivery, branch and G&A expenses increased by $22 million year-over-year, of which $9.6 million was attributable to our weather hedging program… we recorded an expense of $3.1 million under our contract due to the colder weather compared to a benefit of $6.5 million… Adjusted EBITDA rose by $32 million to $128 million.” .
• CFO (call): “For fiscal 2026, we have put in place $15 million of weather hedges with similar terms to those in 2025.” .

Q&A Highlights

• Buybacks: Program remains in place and unchanged at the existing JPM strike; execution is discretionary, not “automatic pilot” .
• Acquisition focus: Pipeline centered on heating oil/propane distribution; HVAC capability build‑out primarily organic .
• Tariffs/inflation: HVAC parts/equipment prices up ~3%–15%; vendors provided notice enabling pricing adjustments .
• Consumer credit: Bad debt historically steady relative to sales; winter demand supports payment behavior—final assessment post‑summer .
• Capital allocation and capacity: Management sees sufficient firepower for opportunities; timing/availability of sizable deals can be lumpy .

Estimates Context

• S&P Global shows no active consensus for Q2 2025 EPS or revenue for SGU; coverage appears limited, preventing a formal beat/miss assessment. Values retrieved from S&P Global.
• Implications: In absence of consensus, investors should anchor on reported fundamentals and trajectory—Q2’s volume/margin strength and acquisition contributions—while noting nonheating season losses from recent acquisitions may temper profits, as flagged by management .

Key Takeaways for Investors

• Q2 operational outperformance was broad‑based: colder weather and acquisitions lifted volumes; margins expanded; Adjusted EBITDA rose to $128.2M despite a $9.6M YoY weather‑hedge headwind .
• Sequential snapback from Q1 underscores seasonality and leverage to temperature; EPS improved to $2.01 vs $0.79 in Q1 .
• Capital return is active and balanced: distribution increased to $0.185; buybacks remain available; management is executing ~$126.5M of acquisitions to strengthen footprint .
• Watch input costs in HVAC (tariffs/inflation) and hedge outcomes; parts/equipment price increases of 3%–15% are being passed through, but near‑term margin effects warrant monitoring .
• Expect nonheating season profit tempering from newly acquired businesses; management explicitly cautioned on seasonal losses outside winter .
• Customer metrics remain resilient: attrition contained and bad debt historically steady; warmer‑than‑normal conditions can slow net adds, but colder periods support additions and payments .
• Near‑term trading lens: narrative skew positive on volume/margin/EBITDA momentum and dividend raise; monitor weather normalization, hedge costs, and integration of recent deals as potential catalysts for volatility .