Advertisement
New Zealand markets closed
  • NZX 50

    12,105.29
    +94.63 (+0.79%)
     
  • NZD/USD

    0.5973
    -0.0002 (-0.04%)
     
  • NZD/EUR

    0.5540
    +0.0007 (+0.12%)
     
  • ALL ORDS

    8,153.70
    +80.10 (+0.99%)
     
  • ASX 200

    7,896.90
    +77.30 (+0.99%)
     
  • OIL

    83.11
    -0.06 (-0.07%)
     
  • GOLD

    2,254.80
    +16.40 (+0.73%)
     
  • NASDAQ

    18,254.69
    -26.15 (-0.14%)
     
  • FTSE

    7,952.62
    +20.64 (+0.26%)
     
  • Dow Jones

    39,807.37
    +47.29 (+0.12%)
     
  • DAX

    18,492.49
    +15.40 (+0.08%)
     
  • Hang Seng

    16,541.42
    +148.58 (+0.91%)
     
  • NIKKEI 225

    40,394.44
    +226.37 (+0.56%)
     
  • NZD/JPY

    90.3220
    -0.0710 (-0.08%)
     

Bull of the Day: Sunoco LP (SUN)

The price of oil tends to move in fairly well defined trends and the earnings of oil companies mostly follow suit. After a nearly three-year rally that began at the beginning of 2016 that saw the price of WTI crude go from below $27/bbl. to over $75/bbl. the last three months of 2018 were brutal.

Trade war fears and the possibility of a global economic slowdown hit the price of oil hard. The revelation that the US would grant exemptions from the sanctions on Iran and allow several trading partners – most notably India – to continue to purchase oil from Iran put further downward pressure on oil.

After falling more than 40% in the fourth quarter of 2018, the price of oil is again on the rise as most of the trade worries appear to be well on their way to being solved and the fears of a global recession have significantly abated.

Founded in 1886 in Pennsylvania, Sunoco LP (SUN) has been operated since 2012 as a subsidiary of Texas-based Energy Transfer Partners (ET), one of the nation’s largest Natural Gas distributors.

ADVERTISEMENT

ET transformed Sunoco’s business to focus on logistics and transportation fuels, as well as the gathering, treatment, processing and marketing of liquid natural gas.

Sunoco distributes fuel to approximately 10,000 convenience stores, independent dealers, commercial customers in 30 states, including the entire east coast from Florida to Maine. They also support the franchised operations of APlus stores, which sell groceries, snacks and beverages at considerably higher margins than fuel products.

Because of the volatility of the commodities markets that Sunoco is involved in, earnings results have been historically volatile, with the Price, Consensus and Surprise chart showing several big beats as well as several big misses.

Though the most recent quarterly earnings of $0.51/share were a bit of a disappointment, estimates for the rest of the year are on the rise, with the full year Zacks Consensus Earnings Estimate now at $2.48/share - an 81% increase over 2018. SUN is currently a Zacks Rank #1 (Strong Buy).

In the fourth quarter of 2018, Sunoco completed three acquisitions, two in the fuel distribution business and one in refined products terminalling, as well as the purchase of $50M worth of convenience store locations that were previously Speedway branded stores. The company also executed an agreement to sell its ethanol plant which was no longer a good fit for the refocused company.

Thanks to a healthy cash position and a strengthening balance sheet, Sunoco paid an exceptional cash dividend in the most recent quarter of $0.825/share – a yield of over 10% annually at current share prices. If cash flows remain strong as analysts expect, it wouldn’t be surprising to see share price appreciation simply in order to grow into that juicy dividend.

Today's Best Stocks from Zacks Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%. This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year. See their latest picks free >>

 

 


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Sunoco LP (SUN) : Free Stock Analysis Report
 
Energy Transfer LP (ET) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research