The Zacks Analyst Blog Sunoco, Western Midstream Partners and Energy Transfer

Core Viewpoint - Sunoco LP is anticipated to report strong second-quarter earnings, with a significant year-over-year increase in earnings per share, despite a slight decline in revenue expectations [2][3]. Earnings Expectations - The Zacks Consensus Estimate for Sunoco's second-quarter earnings is $1.79 per share, reflecting a nearly 130% increase from the previous year [3]. - Quarterly revenue is estimated at $5.5 billion, indicating a 4.4% decrease compared to the same quarter last year [3]. - Sunoco has historically shown mixed performance against earnings estimates, beating expectations once, missing twice, and meeting once in the last four quarters, with an average negative surprise of 27% [4]. Business Operations and Performance - Sunoco is a leading independent fuel distributor in North America, delivering over 8.5 billion gallons annually across more than 40 U.S. states and the Caribbean, which is expected to contribute to stable cash flows [6]. - The company operates a vast pipeline network of approximately 10,000 miles, which is likely to generate stable earnings [7]. - The acquisition of NuStar Energy LP is expected to enhance Sunoco's operational efficiency and cash flow stability [7][11]. Market Position and Valuation - Sunoco's stock has increased by 24.1% over the past year, outperforming the energy sector's growth of 2.5% [8]. - The current trailing 12-month EV/EBITDA ratio for Sunoco is 10.78, which is significantly higher than the energy sector average of 3.03, indicating that the stock may be overvalued [9]. Strategic Developments - Sunoco has entered a joint venture with Energy Transfer LP to consolidate crude oil and produced water-gathering assets in the Permian Basin, which is expected to enhance distributable cash flow per unit [10]. - The recent acquisition of NuStar Energy for $7.3 billion diversifies Sunoco's operations and strengthens its credit profile [11]. Investment Outlook - Given the stable business model and recent strategic moves, it is suggested that investors consider buying Sunoco's stock despite its current overvaluation [12].