Units of Sunoco Logistics Partners LP (SXL) hit a 52-week high of $48.97 on Aug 18, 2014. In fact, the Philadelphia-based energy pipelines and terminals operator has seen its stock price climb 32.80% since the beginning of the year.
Why the Bullishness?
Sunoco Logistics owns a high-quality and diverse portfolio of midstream assets that generate stable and recurring revenues by way of long-term fee-based contracts. Over the past few years, the partnership has consolidated its position in the midstream business, which was achieved through a combination of organic efforts and accretive acquisitions.
Recently, Sunoco Logistics started the open season for its project Permian Longview and Louisiana Extension. The development – which is expected to be online by the second half of 2016 – will transport West Texas crude oil to East Texas as well as to the north and south of Louisiana. The pipeline project will help the producers of the West Texas to get access to the refiners and markets of East Texas and Louisiana. Once the development starts operating, Sunoco Logistics will be able to earn significant cash flows for its unitholders.
Moreover, Sunoco Logistics reported better-than-expected second-quarter 2014 earnings this month. Earnings per unit of 53 cents were substantially higher than the Zacks Consensus Estimate of 36 cents buoyed by improved performance from almost all its business segments.
The partnership also has established a track record of consistent distribution growth. Its current quarterly distribution of 36.50 cents per unit ($1.46 per unit annualized) is up from 7.5 cents per unit (30 cents per unit annualized) at the time of its 2002 IPO.
All the positive developments account for Sunoco Logistics’ current Zacks Rank #1 (Strong Buy), implying that it is expected to significantly outperform the broader U.S. equity market over the next one to three months.
Other Stocks to Consider
Investors can also consider other players in the same industry like Valero Energy Partners LP (VLP), Delek Logistics Partners LP (DKL) and Enbridge Energy Management LLC (EEQ). Valero Energy Partners carries a Zacks Rank #1 while Delek Logistics Partners and Enbridge Energy hold a Zacks Rank #2 (Buy).