Sunoco's (SUN) Q1 Earnings Beat, Revenues Miss Estimates

Sunoco LP SUN announced first-quarter 2019 earnings per unit of 52 cents, beating the Zacks Consensus Estimate of 50 cents. Moreover, the bottom line jumped from the year-ago level of 10 cents. The strong first-quarter earnings were supported by lower cost of sales and operating expenses.

Quarterly operating revenues of the partnership totaled $3,692 million, lagging the Zacks Consensus Estimate of $3,728 million. Also, the figure declined from $3,749 million recorded in the prior-year quarter. The top line was affected by lower non-motor fuel sales.

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. Subsequent to the Retail Divestment and conversion of 207 retail sites to commission agent sites, Sunoco renamed the former Wholesale segment to Fuel Distribution and Marketing, and the Retail segment to All Other.

Fuel Distribution and Marketing: Total gross profit from the segment increased to $307 million from $190 million in the comparable period of 2018, primarily due to higher motor fuel sales.

All Other: This unit reported gross profit of $63 million compared with $106 million in the comparable period of 2018. The year-over-year decline was attributed to lower motor and non-motor fuel sales.

Distribution

For the quarter ended Mar 31, 2019, Sunoco declared a quarterly cash distribution of 82.55 cents per unit, or $3.3020 per unit on an annualized basis. The distribution will be paid on May 15 to unitholders of record at the close of business on May 7.

Expenses

Total expenses in the reported quarter decreased to $3,540 million from $3,653 million in the year-ago period. The decline in total expenses is mainly attributed to lower costs related to sale.

Balance Sheet & Capital Expenditure

As of Mar 31, 2019, Sunoco had cash and cash equivalents of $23 million, and a long-term debt (including revolving credit) of $3,029 million. The debt-to-capitalization ratio was approximately 79%. The company incurred gross capital expenditure of $26 million in the quarter under review.

For 2019, the partnership is planning to allocate around $90 million for growth purposes and $45 million for maintenance.

Signs LOI

Sunoco signed a non-binding letter of intent (LOI) to enter into a joint venture with Energy Transfer LP ET on a diesel fuel pipeline. The pipeline will be operated by Energy Transfer, which will deliver diesel with an initial capacity of 30,000 barrels per day from Hebert, TX to a terminal located in Midland, TX. It is expected to come online by the end of 2019. Sunoco anticipates its cash expenditure for this project at around $50 million.

Zacks Rank and Stocks to Consider

Currently, Sunoco carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include Hess Corp. HES and Cactus, Inc. WHD. While Hess sports a Zacks Rank #1 (Strong Buy), Cactus holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.  

Hess’ earnings are expected to grow more than 115% through 2019.

Cactus’ earnings growth is projected at 11.8% through 2019.

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