Back to top

Image: Bigstock

Here's Why Sunoco (SUN) is an Attractive Investment Bet Now

Read MoreHide Full Article

Sunoco LP (SUN - Free Report) has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 30 days.

The company, with a Zacks Rank #1 (Strong Buy), has gained 3.1% in the past year against the industry’s 4.6% decline.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

What’s Favoring the Stock?

Sunoco is among the largest motor fuel distributors in the U.S. wholesale market by volume. The partnership continues to generate stable cash flows by distributing more than 10 fuel brands under its long-term distribution contracts, with about 10,000 convenience stores.

Higher fuel consumption and refining production in the domestic market will likely drive the demand for wholesale fuel distribution businesses. Sunoco is expected to benefit from recovering gasoline demand and rising diesel fuel consumption. This will boost the partnership’s profits.

In 2022, Sunoco generated adjusted EBITDA of $919 million, which increased 22% from $754 million reported a year ago. Also, Sunoco expects adjusted EBITDA of $850-$900 million for 2023. The partnership is also focusing on reducing costs and expenses, which are expected to benefit its bottom line.

Moreover, Sunoco expects year-over-year continuous volume improvements. For 2023, Sunoco expects fuel volumes of 7.8 billion gallons, indicating an increase from the 7.7 billion gallons reported in 2022. Higher fuel volumes are expected to increase the company’s profitability.

For 2023, the fundamental outlook for the oil and gas refining sector is positive. Thus, the Sunoco stock appears to be a solid bet now, based on the strong fundamentals and compelling business prospects.

Other Key Picks

Investors interested in the energy sector might look at the following companies that presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Oceaneering International, Inc.’s (OII - Free Report) fourth-quarter 2022 adjusted profit of 6 cents per share missed the Zacks Consensus Estimate of a profit of 17 cents. The underperformance was due to weaker results in certain segments. 

For 2023, Oceaneering projects consolidated EBITDA of $260-$310 million and free cash flow generation of $75-$125 million.

Antero Midstream Corporation (AM - Free Report) reported fourth-quarter 2022 adjusted earnings per share of 20 cents, beating the Zacks Consensus Estimate of 17 cents. The strong quarterly results were primarily driven by higher freshwater delivery volumes and increased average freshwater distribution fees.

For 2023, Antero Midstream expects a net income of $340-$380 million, indicating an increase from the $326.2 million reported in 2022.

Marathon Petroleum Corporation’s (MPC - Free Report) adjusted earnings per share of $6.65 comfortably beat the Zacks Consensus Estimate of $5.54. The bottom line was favorably impacted by the stronger-than-expected performance of its key Refining & Marketing segment.

In the fourth quarter, MPC repurchased $1.8 billion of shares and another $700 million worth of shares from the start of this year to Jan 27. Marathon Petroleum, which gave an additional $5 billion share repurchase approval, currently has a remaining authorization of $7.6 billion.

Published in