Bull Of The Day: Sunoco (SUN)

Sunoco (SUN Quick Quote SUN - Free Reportis a Zacks Rank #1 (Strong Buy) that distributes motor fuel to roughly 10,000 customers in more than 30 states. These customers include independent dealers, commercial customers, convenience stores, and other distributors.

Sunoco buys motor fuel from refiners and then sells it to customers, so the price of that product and the spread they collect is huge for its bottom line.

The plunge in energy prices last year was not good for business. However, the recent rise of commodities prices, including oil and gasoline, have energy companies turning the corner.

Fuel, Pump, Energy, Gas Pump, Gas Station, Diesel Fuel

Image Source: Pixabay

About the Company

Sunoco was founded in 2012 and is headquartered in Dallas, TX. The company operates in two segments: Fuel Distribution & Marketing and All Other. The fuel and marketing portion is about 95% of the business, while the other 5% comes from retail stores, food service, and merchandise.

Sunoco has a market cap of $3 billion and a PE of 8. The stock has Zacks Style Scores of “A” in Momentum, Growth and Value. The value proposition should attract investors, especially with the high yield the company pays out.

Energy Prices and Distributions

Sunoco is a master limited partnership or MLP, which means they distribute available cash to investors. The latest distribution yield for the company was 11%.

Earlier in the year there was concern that Sunoco and many other energy companies wouldn’t be able to pay out the dividends. However, with crude oil back over $50 and gasoline over $1.50, energy is back in favor with investors.

Q3 Earnings and Estimates

In early November, the company reported a 14% surprised EPS beat. Sunoco also beat on revenues and raised both FY20 CapEx and EBITDA. Total motor fuel gains sold were down year over year, but the market responded positively, lifting the stock from $25 to $29 in the two weeks following EPS.

It was the second straight beat for Sunoco and they will go for three in a row when they officially report Q4 earnings in February.

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