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Sunoco LP (SUN) Up 2.3% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Sunoco LP (SUN). Shares have added about 2.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Sunoco LP due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Sunoco Misses Earnings and Revenue Estimates in Q4

Sunoco reported fourth-quarter 2020 earnings of 77 cents per unit, missing the Zacks Consensus Estimate of 81 cents. The bottom line, however, improved from 75 cents in the year-ago quarter.

Quarterly revenues of the partnership totaled $2,553 million, missing the Zacks Consensus Estimate of $2,772 million. Moreover, the figure declined from $4,098 million a year ago.

The lower-than-expected quarterly results were owing to reduced contributions from the fuel distribution and marketing business.

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 $249 million from $243 million in the comparable period of 2019, primarily due to higher margin from motor fuel sales.

All Other: This unit reported gross profit of $33 million compared with $42 million in the comparable period of 2019. The year-over-year decline can be attributed to lower margins from non-motor fuel sales and motor fuel sales.

In terms of volumes, the partnership sold 1.8 billion gallons of fuel in the reported quarter, down 12.4% year over year owing to the coronavirus pandemic. Notably, motor fuel gross profit per gallon was recorded at 9.2 cents in the quarter versus the year-ago level of 9.9 cents.

Distribution

For the quarter ended Dec 31, 2020, 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.

Adjusted distributable cash flow was $97 million in the fourth quarter, showing a decline from the year-ago quarter’s $120 million.

Expenses & Capital Expenditure

Total cost of sales and operating expenses in the reported quarter decreased to $2,409 million from $4,000 million a year ago.

The partnership incurred gross capital expenditure of $45 million in the quarter under review, comprising $25 million in growth capital and $20 million of maintenance capital.

Balance Sheet

As of Dec 31, 2020, Sunoco had cash and cash equivalents of $97 million. At fourth quarter-end, it had net long-term debt of $3,106 million, representing a debt-to-capitalization ratio of 0.83.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

Currently, Sunoco LP has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Sunoco LP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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