Yahoo Finance Here's Why it is Worth Investing in Sunoco (SUN) Stock Now
Sunoco LP SUN has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 30 days.
The partnership, with a Zacks Rank #1 (Strong Buy), has gained 10.9% in the past year against the industry’s 4.5% decline.
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What’s Favoring the Stock?
Sunoco is among the largest motor fuel distributors in the U.S. wholesale market by volume. The partnership continues to generate stable cash flows by distributing more than 10 fuel brands under its long-term distribution contracts, with about 10,000 convenience stores.
Higher fuel consumption and refining production in the domestic market will likely drive the demand for wholesale fuel distribution businesses. Sunoco is expected to benefit from recovering gasoline demand and rising diesel fuel consumption. This will boost the partnership’s profits.
In 2022, Sunoco generated adjusted EBITDA of $919 million, which increased 22% from $754 million reported a year ago. For 2023, the company revised its adjusted EBITDA guidance upward to $865-$915 million from the prior stated $850-$900 million. The partnership is also focusing on reducing costs and expenses, which are expected to benefit its bottom line.
Moreover, Sunoco expects year-over-year continuous volume improvements. For 2023, the company expects fuel volumes of 7.8 billion gallons, indicating an increase from the 7.7 billion gallons reported in 2022. Higher fuel volumes are expected to increase the company’s profitability.
For 2023, the fundamental outlook for the oil and gas refining sector is positive. Thus, the Sunoco stock appears to be a solid bet now, based on the strong fundamentals and compelling business prospects.
Other Key Picks
Investors interested in the energy sector might look at the following companies that presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cheniere Energy Partners, L.P.’s CQP recorded first-quarter 2023 earnings per unit of $1.43, beating the Zacks Consensus Estimate of 70 cents. Strong quarterly earnings resulted from a rise in the volumes of LNG delivered and a lower cost of sales.
For 2023, the partnership stated its guidance for distribution per unit at $4-$4.25. In the first quarter, Cheniere generated an operating net cash flow of $847 million, higher than the year-ago quarter’s $800 million.
Dril-Quip, Inc. DRQ reported a first-quarter adjusted loss of 1 cent per share, narrower than the Zacks Consensus Estimate of a loss of 2 cents. Strong quarterly results were supported by improved performance of key offshore markets and some reemerging areas.
For 2023, Dril-Quip expects product bookings to increase 10-20% year over year. Dril-Quip reported net bookings of $53.5 million for the first quarter. DRQ’s first-quarter backlog rose 6% year over year due to the increase in product bookings following improvement in market conditions.
Motor fuel retailer Murphy USA Inc. MUSA announced first-quarter 2023 earnings per share of $4.80, which beat the Zacks Consensus Estimate of $4.06. The outperformance can be attributed to higher volumes and retail fuel contribution.
MUSA has been committed to returning excess cash to its shareholders through continued share buyback programs. As part of this initiative, the fuel retailer recently approved a repurchase authorization of up to $1.5 billion following the completion of the existing $1-billion mandate. The move underscores MUSA’s sound financial position and commitment to rewarding its shareholders.
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