Sunoco (SUN) Gains More Than 5% as Q3 Earnings Beat Estimates

Zacks Equity Research
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Sunoco LP SUN reported third-quarter 2020 earnings of 96 cents per unit, beating the Zacks Consensus Estimate of 84 cents. The bottom line also improved from 57 cents in the year-ago quarter.  The strong quarterly earnings were aided by higher contributions from fuel distribution and marketing business.

Quarterly revenues of the partnership totaled $2,805 million, beating the Zacks Consensus Estimate of $2,799 million. However, the figure declined from $4,331 million in the prior-year quarter.

Sunoco LP Price, Consensus and EPS Surprise

 

Sunoco LP Price, Consensus and EPS Surprise
Sunoco LP Price, Consensus and EPS Surprise

Sunoco LP price-consensus-eps-surprise-chart | Sunoco LP Quote

 

Notably, following the announcement of strong earnings on Nov 4, the stock has gained 5.2%.

Segmental Performance

The partnership reports financial statements through two reportable segments — Fuel Distribution and Marketing, and All Other.

Fuel Distribution and Marketing: Total gross profit from the segment increased to $265 million from $236 million in the comparable period of 2019, primarily due to higher motor fuel sales.

All Other: This unit reported gross profit of $43 million compared with $56 million in the comparable period of 2019. The year-over-year decline can be attributed to lower non-motor fuel sales and motor fuel sales.

In terms of volumes, the partnership sold 1.9 billion gallons of fuel in the reported quarter, down 12.1% year over year owing to the coronavirus pandemic. Notably, motor fuel gross profit per gallon was recorded at 12.1 cents in the quarter, higher than the year-ago level of 11.6 cents.

Distribution

For the quarter ended Sep 30, 2020, Sunoco declared a quarterly cash distribution of 82.55 cents per unit or $3.3020 on an annualized basis. Markedly, this distribution was flat on a sequential basis.

Adjusted distributable cash flow was $139 million in the third quarter, suggesting an improvement from the year-ago quarter’s $133 million.

Expenses & Capital Expenditure

Total cost of sales and operating expenses in the reported quarter decreased to $2,658 million from $4,214 million a year ago.

The partnership incurred gross capital expenditure of $20 million in the quarter under review, comprising $14 million in growth capital and $6 million of maintenance capital.

Balance Sheet

As of Sep 30, 2020, Sunoco had cash and cash equivalents of $63 million. At third quarter-end, it had net long-term debt of $2,877 million, representing a debt to capitalization ratio of 0.82.

Outlook

For 2020, the partnership projects adjusted EBITDA for 2020 at or more than $740 million. The company’s expectation for 2020 growth capital spending was a minimum of $75 million. Moreover, the company projects 2020 operating expenses in the band of $460 to $475 million.

Zacks Rank & Key Picks

Sunoco currently has a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked players in the energy space include PDC Energy Inc. (PDCE), Matador Resources Company MTDR and Antero Resources Corporation AR. While PDC Energy sports a Zacks Rank #1 (Strong Buy), Matador and Antero carry a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

PDC Energy is likely to see earnings growth of 13.3% in 2020.

Matador has seen upward estimate revisions for its 2020 bottom line in the past 30 days.

Anterohas seen upward estimate revisions for 2020 bottom line in the past 30 days.

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Sunoco LP (SUN) : Free Stock Analysis Report
 
PDC Energy, Inc. (PDCE) : Free Stock Analysis Report
 
Matador Resources Company (MTDR) : Free Stock Analysis Report
 
Antero Resources Corporation (AR) : Free Stock Analysis Report
 
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