Star Group reports strong financial performance in Q1 of fiscal 2026, driven by colder weather and strategic initiatives, positioning for future growth.
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Star Group Reports Strong First Quarter for Fiscal 2026
In the first quarter of fiscal 2026, Star Group demonstrated robust financial performance, driven by favorable weather conditions, strategic operational improvements, and continued focus on service and installations. The company reported significant year-over-year growth in key metrics, including adjusted EBITDA and net income, positioning itself well for the ongoing heating season. With acquisitions on the horizon and a commitment to customer service, the company appears poised for continued success.
Financial Performance
Star Group's financial metrics indicate a strong start to fiscal 2026. The company reported an adjusted EBITDA of $68 million, reflecting an increase of $16.5 million or 32% year-over-year. This growth was attributed to several factors:
- Increased Home Heating Oil and Propane Volume: Volumes rose by 11.5 million gallons, or 14%, reaching approximately 94 million gallons.
- Colder Temperatures: The average temperatures during the quarter were 19% colder than the same period last year and 6% colder than normal, significantly driving demand.
- Product Gross Profit: The company’s product gross profit increased by $29 million, or 19%, totaling approximately $179 million.
Despite these positives, the company faced challenges due to increased operational costs. Delivery and general administrative expenses rose by $11 million year-over-year, attributed to the colder temperatures and a $5 million charge related to the company’s weather hedge program. This charge affected net income, which saw an increase to $36 million, up by $3 million from the previous year, despite higher depreciation, amortization expenses, and net interest expenses.
Strategic Initiatives
During the first quarter, Star Group continued to focus on strategic initiatives that solidify its market position:
- Acquisitions: Although no acquisitions were closed in the first quarter, the company recently acquired a small heating oil business, demonstrating its commitment to growth. Management anticipates pursuing additional acquisition opportunities as the fiscal year progresses.
- Operational Improvements: The company has emphasized efficiency and operational execution, particularly in service and installation areas. The focus on these aspects has yielded significant improvements in overall profitability.
- Customer Service: Star Group remains dedicated to enhancing customer service, which has proven essential in managing demand during extreme weather conditions. CEO Jeff Woosnam praised employees for their hard work and commitment during challenging delivery conditions caused by snow and ice.
Future Outlook
Looking ahead, management expressed cautious optimism regarding the remainder of fiscal 2026. Key points include:
- Continued Cold Weather: Cold temperatures are expected to persist, with January showing 2% colder conditions compared to the previous year. This trend is likely to benefit the company in the near term.
- Operational Preparedness: The company is well-prepared to handle operational challenges, focusing on customer service and cost management while expanding service and installation profitability.
- Market Positioning and Growth: Star Group is positioned to explore new opportunities as spring approaches, with several acquisition prospects currently under review. Management remains vigilant about potential market changes and is ready to adapt accordingly.
“Although it's too early to say how fiscal 2026 will play out, we remain vigilant in providing excellent customer service, keeping costs down, and growing our service and installation profitability,” stated Woosnam during the call.
In summary, Star Group's first-quarter results reflect a strong performance bolstered by colder weather and strategic initiatives that enhance both profitability and customer service. The company’s proactive stance on acquisitions and operational efficiency positions it well for future growth, making it an attractive consideration for investors looking to capitalize on the heating sector.
Overall, the first quarter of fiscal 2026 has laid a solid foundation for Star Group. With its strategic focus, commitment to customer service, and adaptability in operational execution, the company is well-equipped to navigate the challenges and opportunities in the heating market as it progresses through the fiscal year.