Sunoco Looks Attractive: Analyst Cites Pullback, Upcoming Guidance As Catalysts
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jun 07 2024
0mins
Should l Buy SUN?
Source: Business Insider
- Upgrade of Sunoco LP: Stifel analyst upgraded Sunoco LP to Buy from Hold with a price target of $62.00.
- Attractive Re-entry Point: Sunoco's unit price dropped by 13% since mid-February, making it an attractive re-entry point according to the analyst.
- Anticipated Guidance Impact: Management's upcoming guidance around second-quarter FY24 earnings could boost the unit price.
- 2024 Outlook Update: The guidance is expected to provide an update on the 2024 outlook for Sunoco's legacy business, NuStar assets, and potential synergies.
- Financial Estimates and Investment Opportunities: Akyol estimates EBITDA for FY24 and FY25, and investors can access the stock through InfraCap MLP ETF and Global X MLP ETF.
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Analyst Views on SUN
Wall Street analysts forecast SUN stock price to rise
6 Analyst Rating
6 Buy
0 Hold
0 Sell
Strong Buy
Current: 58.900
Low
57.00
Averages
63.67
High
70.00
Current: 58.900
Low
57.00
Averages
63.67
High
70.00
About SUN
Sunoco LP is an energy infrastructure and fuel distribution master limited partnership operating in over 32 countries and territories in North America, the Greater Caribbean, and Europe. The Company's midstream operations include a network of approximately 14,000 miles of pipeline and over 160 terminals. Its segments include Fuel Distribution, Pipeline Systems and Terminals. The Fuel Distribution segment supplies motor fuel to independently operated dealer stations, distributors, commission agents and other consumers. The Pipeline Systems segment includes the operations of its refined products, crude oil and anhydrous ammonia pipelines, as well as other assets that are operated and managed on an integrated basis with its pipeline systems, including certain terminal and storage assets. Its Terminals segment is composed of facilities that provide storage, handling and other services on a fee basis for refined products, crude oil, specialty chemicals, renewable fuels and other liquids.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Dividend History Comparison: Unlike Enterprise Products Partners, Energy Transfer cut its distribution in 2020, and while it now targets annual growth of 3% to 5%, past cuts may have disappointed income-dependent investors.
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- Security Review Requirement: The German government has mandated the sale of the unit operating a vital military fuel pipeline network as a condition for Sunoco LP's acquisition of TanQuid, indicating heightened vigilance against foreign control of critical infrastructure.
- State Ownership Context: The government currently owns 51% of the TanQuid unit in question and has requested the defense ministry to acquire the remaining shares, reflecting a stringent regulatory stance on foreign acquisitions to ensure national security.
- Transaction Progress: Sunoco's purchase of TanQuid was approved and completed earlier this month, indicating that despite regulatory challenges, the deal is advancing, which may impact the future investment landscape.
- Historical Intervention Reflection: This decision echoes past interventions aimed at blocking foreign control, particularly by Chinese firms, underscoring the German government's ongoing efforts to protect national security and critical infrastructure.
See More
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- Future Investment Plans: The company plans to invest $5.5 billion in capital projects in 2026, which is expected to support a distribution growth of 3% to 5%, demonstrating its commitment to becoming a more reliable income investment.
- Historical Trust Issues: Although the distribution has recovered and surpassed pre-pandemic levels, the cut during the 2020 pandemic still raises concerns among conservative investors, potentially affecting their investment decisions.
- Alternative Competitors: For investors wary of management decisions, alternatives like Enterprise Products Partners and Enbridge offer a more stable dividend history, albeit with slightly lower yields of 6.6% and 5.8%, respectively.
See More
