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Why Is Sunoco LP (SUN) Down 7% Since Last Earnings Report?

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Zacks Equity Research
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It has been about a month since the last earnings report for Sunoco LP (SUN). Shares have lost about 7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Sunoco LP due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Sunoco Misses Q3 Earnings & Revenues Estimates, Declines Y/Y

Sunoco LP reported third-quarter 2019 earnings per unit from continuing operations of 57 cents, missing the Zacks Consensus Estimate of 81 cents. Moreover, the bottom line plunged from the year-ago level of $1.15.

Quarterly operating revenues of the partnership totaled $4,331 million, missing the Zacks Consensus Estimate of $4,399 million. Also, the figure declined from $4,761 million recorded in the prior-year quarter.

The weak third-quarter results were due to lower profits from both the segments of the partnership, attributed to decline in motor fuel gross profit per gallon. The negatives were partially offset by higher fuel selling volumes in the quarter under review.

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 decreased to $236 million from $261 million in the comparable period of 2018, primarily due to lower Motor fuel sales, partially offset by higher Non-motor fuel sales.

All Other: This unit reported gross profit of $56 million compared with $72 million in the comparable period of 2018. The year-over-year decline was attributed to lower Motor and Non-motor fuel sales.

In terms of volumes, the partnership sold a record high of 2.11 billion gallons of fuel in the reported quarter, up 5.3% year over year. Motor fuel gross profit per gallon was recorded at 11.6 cents in the quarter, lower than the year-ago level of 12.7 cents.

Distribution

For the quarter ended Sep 30, 2019, Sunoco declared a quarterly cash distribution of 82.55 cents per unit, or $3.3020 on an annualized basis. Markedly, this distribution is flat on a sequential basis.

Expenses

Total expenses in the reported quarter decreased to $4,214 million from $4,602 million in the year-ago period. The decline in total expenses is mainly attributed to lower costs related to sale.

Capital Expenditure

The partnership incurred gross capital expenditure of $46 million in the quarter under review, including $33 million of growth capital and $13 million of maintenance capital.

Balance Sheet

As of Sep 30, 2019, Sunoco had cash and cash equivalents of $13 million, and a long-term debt (including revolving credit) of $3,060 million. Its debt-to-capitalization ratio was 80.1%.

Guidance

Sunoco expects full-year 2019 operating expenses to be lower than the previous guided figure of $540 million. In 2019, the partnership is planning to allocate around $115 million for growth purposes and $40 million for maintenance.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

Currently, Sunoco LP has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Sunoco LP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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