Sunoco (SUN) Units Down Nearly 2% Since Q1 Earnings Beat

Sunoco LP’s SUN units have declined nearly 2% since May 6, even though the partnership reported strong quarterly results. Investors might be concerned about the rising commodity prices and negative impacts of the coronavirus pandemic. Moreover, motor fuel gross profit per gallon decreased for the first quarter even though economic activities are rapidly recovering.

Q1 Results

The partnership reported first-quarter 2021 earnings of $1.60 per unit, significantly beating the Zacks Consensus Estimate of 69 cents. It reported an adjusted loss of $1.78 per unit in the year-ago quarter.

Quarterly revenues of the partnership totaled $3,471 million, beating the Zacks Consensus Estimate of $2,963 million. Moreover, the figure increased from $3,272 million a year ago.

The strong quarterly results were owing to reduced total operating expenses.

Sunoco LP Price, Consensus and EPS Surprise

Sunoco LP Price, Consensus and EPS Surprise

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

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 $317 million from $35 million in the comparable period of 2020, primarily due to higher motor fuel sales.

All Other: This unit reported gross profit of $34 million compared with $73 million in the comparable period of 2020. 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 1.76 billion gallons of fuel in the reported quarter, down 7.5% year over year owing to the coronavirus pandemic. Notably, motor fuel gross profit per gallon was recorded at 10.3 cents for the quarter versus the year-ago level of 13.1 cents.

Distribution

For the quarter ended Mar 31, 2021, 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. Trailing 12-month cash coverage was 1.35X.

Adjusted distributable cash flow was $108 million for the first quarter, reflecting a decline from the year-ago quarter’s $159 million.

Expenses & Capital Expenditure

Total cost of sales and operating expenses for the reported quarter decreased to $3,267 million from $3,354 million a year ago.

The partnership incurred gross capital expenditure of $18 million for the quarter under review, comprising $13 million in growth capital and $5 million of maintenance capital.

Balance Sheet

As of Mar 31, 2021, Sunoco had cash and cash equivalents of $95 million. At first quarter-end, it had net long-term debt of $2,680 million, down from $3,106 million at fourth quarter-end. It had a long-term debt to capitalization of 81.4%.

Guidance

The partnership expects 2021 maintenance capital to be $45 million. Growth capital expenditure for the year is expected at $150 million, reflecting a rise from the previous guidance of $120 million, primarily due to the Brownsville terminal addition. It anticipates full-year 2021 adjusted EBITDA within $725-$765 million. In 2020, the metric was recorded at $739 million. Importantly, it expects operating expenses within $440-$450 million for 2021.

Moreover, the firm expects fuel volumes for the year within 7.52-7.75 billion gallons, indicating a rise from the 2020 level of 7.09 billion gallons. Fuel margins will likely be in the range of 11-12 cents per gallon. The same in 2020 was 11.9 cents per gallon.

Zacks Rank & Stocks to Consider

The partnership currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include Suburban Propane Partners, L.P. SPH, NOW Inc. DNOW and PHX Minerals Inc. PHX, each having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Suburban Propane’s bottom line for 2021 is expected to rise 58.8% year over year.

NOW’s bottom line for 2021 is expected to rise 86.2% year over year.

PHX Minerals’ bottom line for 2021 is expected to surge 40% year over year.

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