Sunoco Logistics Earnings Beat by a Penny, Down Y/Y

Zacks

Energy pipelines and terminals operator, Sunoco Logistics Partners LP (SXL) reported better-than-expected first-quarter 2014 earnings after the closing bell on May 6. The stock gained about 2.8% the following day, settling at $95.55 per unit. However, Sunoco Logistics units slid to $92.97 at the close on Thursday, May 8.  

Earnings per unit (EPU) of 66 cents surpassed the Zacks Consensus Estimate by a penny on the back of improved performance by three of its four segments.  

The bottom line, however, fell significantly below the year-ago quarter level of $1.09 per unit primarily due to a sharp fall in profits from the Crude Oil Acquisition and Marketing segment. Higher operating expenses further dampened the results.

Quarterly revenues of $4,477.0 million were up 27.5% from first-quarter 2013 and comfortably outpaced the Zacks Consensus Estimate of $4,020.0 million. Higher throughput and per barrel revenues aided the rise.

Sunoco Logistics' distributable cash flow (DCF.TO) decreased about 19% year over year to $158.0 million.

Unit-Split

The partnership announced a two-for-one unit split effective on Jun 12. The additional unit will be distributed to unitholders of record as of Jun 5. Sunoco Logistics stated that this move would make the units more accessible to investors.

Quarterly Distribution

Last month, Sunoco Logistics raised its quarterly distribution by 5.0% sequentially and 21.0% year over year to 69.50 cents per unit or $2.78 per unit annualized.  

Segmental Performance

Crude Oil Pipelines: Adjusted earnings before interest, taxes, depreciation and amortization expenses (:EBITDA) in the segment moved up 52.5% to $93.0 million from the year-earlier level of $61.0 million, driven by enhanced throughput volumes and improved tariffs.

Crude Oil Acquisition and Marketing: Adjusted EBITDA in this segment came in at $12.0 million, down 89.3% from the first-quarter 2013 level. The decline resulted from narrower crude oil margins.

Terminal Facilities: The segment had adjusted EBITDA of $86.0 million, up 59.3% year over year. Better performance at the Nederland terminal and improved volume and margins from refined products acquisition and marketing operations drove the performance.

Refined Products Pipeline System: Adjusted EBITDA in this segment totaled $17.0 million, compared with $9.0 million in first-quarter 2013. The Mariner West project, which started operations in the fourth quarter of last year, was the key growth driver.

Capital Expenditure & Balance Sheet

Sunoco Logistics’ maintenance capital expenditure and expansion capital expenditure for the reported quarter totaled $18.0 million and $465.0 million, respectively.  

As of Mar 31, 2014, Sunoco Logistics had $140.0 million cash and cash equivalents. The partnership had $3,073.0 million in total debt (consisting of $985.0 million of borrowing under the partnership's credit facility), representing a debt-to-capitalization ratio of approximately 32.7%.  

Zacks Rank & Other Stocks to Consider

Sunoco currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can consider better-ranked players in the oil and gas pipeline master limited partnership sector like Boardwalk Pipeline Partners, LP (BWP), Magellan Midstream Partners LP (MMP) and Targa Resources Partners LP (NGLS). All these stocks sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on SXL
Read the Full Research Report on MMP
Read the Full Research Report on NGLS
Read the Full Research Report on BWP


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