NEW YORK (AP) -- Sunoco Logistics Partners LP hit a 52-week high Wednesday after an analyst said the pipeline operator has potential to grow rapidly and expand its paybacks to shareholders.
R.W. Baird analyst Ethan H. Bellamy initiated coverage with an "Outperform" rating on the shares. Sunoco Inc. owns about one-third of Sunoco Logistics Partners. Sunoco Inc. is being acquired by Energy Transfer Partners LP in a deal expected to be completed by year's end.
When that happens, Bellamy believes Sunoco Logistics Partners has the potential to grow rapidly, and possibly even become a vehicle for Energy Transfer to acquire more companies. That would likely lead to a rapid increase in unit prices and more distributions for shareholders.
When Sunoco Logistics reported a 62 percent jump in second-quarter earnings earlier this month, it raised its distribution by 10 percent, to 47 cents per unit, crediting strong demand and business growth in the transfer of crude oil. The company has nearly 5,000 miles of crude oil pipelines in the Southwest and Midwest, including a 60 percent interest in the 580-mile West Texas Gulf Pipeline and a 91 percent interest in the 990-mile Mid-Valley Pipeline that runs from Texas to Michigan.
Bellamy thinks the stock has potential to grow as much as 19 percent over the next year as it's incorporated into Energy Transfer. He has a $53 price target on the stock.
Bellamy also initiated coverage of Energy Transfer Partners on Wednesday with a 'Neutral' rating.
Sunoco Logistics rose 4.6 percent, or $2.07, to $46.74 in afternoon trading after rising to a high for the year of $46.81 earlier in the session. Energy Transfer Partners fell 2 cents to $42.48.