SPH vs. UGI: Which Propane Stock Has More Fuel for Growth?

Suburban Propane Partners L.P. SPH and UGI Corporation UGI both have major propane businesses, but they are built differently. SPH is mainly focused on propane distribution in the United States and is also expanding into renewable natural gas, or RNG. UGI is broader. Along with AmeriGas, its U.S. propane business, it owns regulated natural gas utilities, midstream assets and international LPG operations.  That gives UGI more ways to earn money, while Suburban Propane offers a more focused propane-and-renewables story.

The Case for SPH Stock

SPH’s biggest strength is its large customer network. The partnership serves about 1 million customers through roughly 750 locations in 42 states. Its customers include households, businesses, farms and industrial users. This wide footprint gives Suburban Propane a large base from which to grow. In the latest quarter, warmer weather hurt heating demand, but customer growth in areas such as agriculture, industrial markets and national accounts helped soften the impact.

Another important opportunity is RNG. SPH has been building a renewable energy business alongside propane. Its new facility in Upstate New York is already operating, while an upgraded plant in Columbus, OH, is expected to start injecting pipeline-quality RNG. With all three RNG facilities expected to be running as fiscal 2027 begins, management expects annual RNG injection of 750,000-800,000 MMBtu. That could give SPH a new source of growth outside traditional propane.

Suburban Propane is also trying to strengthen its finances. During the fiscal third quarter, it repaid $36.2 million of revolver borrowings using operating cash flow and proceeds from its equity program. Its distribution coverage was 2.07 times for the trailing 12 months, supporting the annualized distribution of $1.30 per unit.

There are still risks. Propane demand depends heavily on weather, especially during the heating season. Warm conditions can reduce customer usage quickly. Costs are also concerning. Higher payroll, employee benefits, fuel and vehicle-maintenance expenses recently hurt profitability.  Leverage, too, remains elevated at 4.35 times, so reducing debt is still important.

The Case for UGI Stock

UGI’s main advantage is diversification. It does not rely only on propane. The company owns regulated natural gas utilities and a midstream business, which can provide more stable earnings when propane demand is weak. UGI is directing much of its capital spending toward natural gas operations, including pipeline upgrades and customer growth. Its midstream business also has planned well-pad expansions that could benefit from rising natural gas demand tied to power generation and data centers.

AmeriGas, UGI’s propane business, is showing signs of operational improvement. Management has been working to improve customer service, safety and retention while expanding sales efforts.  AmeriGas leverage fell to 4.3 times, its lowest level in 10 years. UGI also expects AmeriGas to begin sending cash distributions back to the parent company in fiscal 2027, an important step in the turnaround.

UGI International adds another source of cash flow and growth. The business has strong customer retention, helped by high tank ownership, and management sees opportunity in converting heating-oil customers to LPG. That market is much larger than UGI’s current LPG base in some regions.

However, UGI still faces problems. AmeriGas retail propane gallons fell 10% in the latest quarter because of warm weather and continued customer losses. Even after adjusting for weather and the Hawaii divestiture, volumes were down. UGI International also reported lower retail volumes following recent asset sales.  Higher interest expense and the absence of some prior-year tax benefits have also pressured earnings.

Price Performance

UGI has performed better so far this year. Its shares are up 2.4% year to date, while Suburban Propane is down 5%. That suggests that investors have responded more positively to UGI’s recent progress.

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Valuation

SPH looks cheaper on a forward price-to-sales basis. SPH trades at about 0.82 times forward sales, compared with roughly 1.05 times for UGI. On this measure, Suburban Propane has the advantage.

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Earnings Estimates

SPH stands out more clearly here. The Zacks Consensus Estimate for the partnership’s fiscal 2026 earnings is $2.05 per unit, implying 34% growth from fiscal 2025.

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UGI’s fiscal 2026 estimate is $2.85 per share, pointing to a 14.2% decline. The earnings outlook therefore favors SPH.

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Which Stock Deserves a Spot in Your Portfolio?

Overall, UGI offers a more diversified business and has delivered better share-price performance this year. Still, Suburban Propane combines a cheaper valuation, a much stronger earnings-growth outlook and an expanding RNG platform. Both companies remain exposed to weather, but SPH currently has the better earnings setup. SPH carries a Zacks Rank #2 (Buy) and is therefore better placed at the moment than Zacks Rank #4 (Sell) UGI.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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