Star Group Q3 Earnings Call Highlights

Star Group (NYSE:SGU) reported a wider fiscal third-quarter loss as higher insurance claims, lower heating-oil and propane volumes and an unfavorable change in derivative values outweighed improved service and installation profitability.

The company posted a net loss of $28 million for the fiscal 2026 third quarter, $11.4 million greater than the loss recorded in the prior-year period. Adjusted EBITDA loss widened by $7 million to $17.7 million.

Chief Financial Officer Richard Ambury said third-quarter home heating oil and propane volume declined by 3.4 million gallons, or 9.4%, to 33 million gallons. Volume added through acquisitions was more than offset by net customer attrition and other factors.

Although degree days were 16% colder than the prior-year quarter, they remained 6% warmer than normal. Ambury noted that temperatures during the April-and-May shoulder months had a less significant impact on demand than winter weather.

Margins Hold, but Insurance Costs Rise

Product gross profit was essentially unchanged at $72 million. Higher per-gallon margins on home heating oil and propane, along with increased gross profit from other petroleum products, offset the impact of lower fuel volume.

Service and installation operations continued to improve. President and Chief Executive Officer Jeff Woosnam said the segment generated combined gross profit of $15.6 million, up $1.4 million from the comparable quarter a year earlier.

“Our strategy of selling more value-added products and services to our existing clients while expanding our HVAC offering in select markets beyond our traditional customer base is beginning to take shape,” Woosnam said.

However, delivery, branch and general-and-administrative expenses rose $8.7 million year over year. The increase was driven primarily by $6.2 million in higher insurance claims expense related to adverse developments involving certain claims.

The quarterly net loss also reflected an $8.6 million unfavorable non-cash change in the fair value of derivative instruments. A $3.4 million larger income-tax benefit and $900,000 lower depreciation and amortization expense partly offset those effects, according to Chris Witty, Star Group’s investor relations advisor.

Nine-Month Results Benefit From Colder Weather

For the first nine months of fiscal 2026, Star Group reported net income of $116 million, an increase of $14 million from the prior-year period. Adjusted EBITDA rose $20 million to $189 million.

Home heating oil and propane volume for the nine-month period increased by 8.6 million gallons, or 3.3%, to 271 million gallons. Ambury attributed the gain to colder weather and acquisition-related volume, which more than offset customer attrition and other factors.

Temperatures across the company’s operating regions were 11.5% colder than the prior-year period and 3% colder than normal. Product gross profit increased $48 million, or 10%, to $529 million, supported by higher fuel volumes, stronger per-gallon margins and increased gross profit from other petroleum products.

The colder first half of the fiscal year and numerous snowstorms boosted demand for service, but also increased service-related expenses. Installation gross profit rose $2.5 million, while service gross loss increased $5.7 million. Ambury also cited increased propane tank sets as a factor.

Delivery, branch and G expenses increased $25 million for the nine-month period. That included $1.9 million tied to the company’s weather-hedging program. Star recorded a $5 million weather-hedge expense in fiscal 2026, compared with a $3.1 million expense in fiscal 2025.

Recent acquisitions added $3.2 million to operating expenses, while costs in the base business increased $20 million due to higher volume, severe-weather-related operating impacts and insurance claims, Ambury said.

Acquisition Activity and Heating-Season Planning

Woosnam said Star Group did not complete acquisitions during the third quarter, but closed on a small heating-oil dealer after the quarter ended. The company has completed two smaller transactions so far in fiscal 2026 and is evaluating several additional businesses.

In response to an analyst question, Woosnam said he would not characterize the current opportunities as transformational acquisitions. “We certainly have a full pipeline and the team is busy,” he said.

Management said it is using the summer months to strengthen operations, streamline parts of the business where appropriate and prepare for the next winter heating season.

Ambury said the company currently does not anticipate product-availability issues for the coming season and is working with wholesalers to secure supply contracts. He noted that higher prices could affect customer behavior, including the timing of decisions around fixed-price or price-protection plans.

Woosnam said Star Group remains positioned for strong fiscal 2026 performance as it continues investing in service and installation growth.

About Star Group (NYSE:SGU)

Star Group, L.P., together with its subsidiaries, provides home heating oil and propane products and services to residential and commercial customers in the United States. It offers gasoline and diesel fuel; and installs, maintain, and repairs heating and air conditioning equipment. As of September 30, 2023, the company served approximately 402,200 full service residential and commercial home heating oil and propane customers and 52,400 customers on a delivery only basis. It also sells gasoline and diesel fuel to approximately 26,600 customers.

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