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

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·3 min read
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Sunoco LP SUN has witnessed upward earnings estimate revisions for 2022 in the past 60 days. The leading independent fuel distributor in the United States, currently sporting a Zacks Rank #1 (Strong Buy), is expected to witness 26.1% earnings growth in 2022.

Sunoco LP Price

 

Sunoco LP Price
Sunoco LP Price

Sunoco LP price | Sunoco LP Quote

What’s Favoring the Stock?

Sunoco is among the largest motor fuel distributors in the U.S. wholesale market in terms of 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.

Apart from geopolitical uncertainties resulting from Russia’s invasion of Ukraine, oil’s remarkable turnaround has been prompted by a demand spike due to the reopening of economies.

Because of a rebound in activities, 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 the recovering gasoline demand and rising diesel fuel consumption. This will boost the partnership’s profits.

For 2022, Sunoco revised its adjusted EBITDA guidance upward to $795-$835 million from $770-$810 million. The metric suggests an improvement from the $754 million reported last year. Despite the pandemic-related uncertainty, Sunoco expects year-over-year continuous volume improvements.

The partnership is currently focusing on reducing costs and expenses, which are expected to benefit its bottom line. In 2021, the partnership’s lease operating expenses decreased to $59 million from $61 million a year ago.

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 also presently flaunt a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Imperial Oil Limited IMO is one of the largest integrated oil companies in Canada. IMO’s debt-to-capitalization of 18.9% is quite conservative versus 32.1% for the sub-industry it belongs to. Imperial Oil has ample liquidity, with cash and cash equivalents of $1.7 billion.

Imperial Oil remains strongly committed to returning money to investors via dividends. The company’s board of directors approved a hike in the quarterly dividend payment. The new payout of 34 Canadian cents is 26% above the prior dividend. Also, Imperial Oil revised its existing share repurchase policy to buy up to 4% of outstanding common shares.

Enterprise Products Partners EPD is among the leading midstream energy players in North America. EPD is well-positioned to generate additional cash flow from under-construction growth capital projects worth $4.6 billion.

Enterprise Products Partners is strongly committed to returning cash to shareholders. The partnership’s board of directors increased its quarterly cash distribution to 46.5 cents per unit, suggesting a 3.3% hike from the prior dividend of 45 cents.

Marathon Petroleum Corporation MPC is a leading independent refiner, transporter and marketer of petroleum products. MPC currently has a Zacks Style Score of A for Growth and Momentum, and B for Value.

The industry’s improved fundamentals in the form of constrained supply and robust demand have led to rising refining profitability for the players involved. As a reflection of this, Marathon Petroleum’s Refining & Marketing segment reported an operating income of $768 million in the first quarter, turning around from the year-ago loss of $598 million.


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