Star Group (SGU) Q3 FY26 earnings call: guidance and Q&A

Star Group's third fiscal quarter, a non-heating period, saw home heating oil and propane volume decrease by 9.4% to 33 million gallons, primarily due to net customer attrition, despite moderately colder temperatures year-over-year. Product gross profit remained flat at $72 million, as higher per-gallon margins and other petroleum products offset the volume decline.

The service and installation business continued its positive trend, delivering a gross profit of $15.6 million in Q3, an increase of $1.4 million from the prior year. This growth is attributed to a strategy of selling more value-added products and expanding HVAC offerings, with management noting strong employee engagement.

Operating costs were significantly impacted by an $8.7 million year-on-year increase in delivery, branch, and G&A expenses, largely driven by $6.2 million in higher insurance claims due to adverse developments. This contributed to a net loss of $28 million for the quarter and a $7 million increase in adjusted EBITDA loss.

For the first nine months of fiscal 2026, home heating oil and propane volume increased by 3.3% to 271 million gallons, benefiting from colder temperatures and acquisitions. Product gross profit rose by $48 million, or 10%, to $529 million. Adjusted EBITDA for the nine-month period increased by $20 million to $189 million, leading to a net income of $116 million, up $14 million year-over-year.

The company closed a small heating oil dealer acquisition post-quarter end and is actively assessing several attractive businesses. While no "transformational" acquisitions are currently in the pipeline, management maintains a full pipeline of potential smaller deals and an unchanged approach to M&A.

Star Group is utilizing the summer months to strengthen operations, streamline processes, and prepare for the upcoming winter season, alongside continued investment in the service and installation business for further revenue growth.