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Why Is Sunoco LP (SUN) Down 4.6% Since Last Earnings Report?

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A month has gone by since the last earnings report for Sunoco LP (SUN - Free Report) . Shares have lost about 4.6% in that time frame, underperforming the S&P 500.

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

Sunoco Beats Q2 Earnings & Revenues Estimates

Sunoco reported second-quarter 2021 earnings of $1.73 per unit, significantly beating the Zacks Consensus Estimate of $1.03. The bottom line jumped from adjusted earnings of $1.64 per unit in the year-ago quarter.

Quarterly revenues of the partnership totaled $4,392 million, beating the Zacks Consensus Estimate of $3,545 million. The figure also increased from $2,080 million a year ago.

The strong quarterly results were owing to increased fuel volumes and non-motor fuel gross profits.

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 decreased to $311 million from $317 million in the comparable period of 2020, primarily due to lower motor fuel sales.

All Other: This unit reported gross profit of $42 million compared with $41 million in the comparable period of 2020. The marginal year-over-year increase can be attributed to higher non-motor fuel sales.

In terms of volumes, the partnership sold 1.9 billion gallons of fuel in the reported quarter, up 28% year over year owing to the energy demand recovery from the coronavirus pandemic. Motor fuel gross profit per gallon was recorded at 11.3 cents for the quarter versus the year-ago level of 13.5 cents.

Distribution

For the quarter ended Jun 30, 2021, 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. Trailing 12-month cash coverage was 1.41X.

Adjusted distributable cash flow was $145 million for the second quarter, reflecting an increase from the year-ago quarter’s $122 million.

Expenses & Capital Expenditure

Total cost of sales and operating expenses for the reported quarter surged to $4,176 million from $1,872 million a year ago.

The partnership incurred gross capital expenditure of $30 million for the quarter under review, comprising $23 million in growth capital and $7 million of maintenance capital.

Balance Sheet

As of Jun 30, 2021, Sunoco had cash and cash equivalents of $87 million, sequentially down from $95 million. At second-quarter end, it had net long-term debt of $2,673 million, down from $2,680 million at first-quarter end. It had a long-term debt to capitalization of 79.6%.

Guidance

It reiterated full-year 2021 adjusted EBITDA guidance within $725-$765 million. In 2020, the metric was recorded at $739 million. It expects operating expenses within $440-$450 million for 2021.

The firm expects fuel volumes for the year within 7.25-7.75 billion gallons, indicating a rise from the 2020 level of 7.09 billion gallons. Fuel margins will likely be in the range of 11-12 cents per gallon. The same in 2020 was 11.9 cents per gallon.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

Currently, Sunoco LP has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% 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

Sunoco LP has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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