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Sunoco (SUN) Stock Dips 1.5% Despite Posting Q1 Earnings Beat

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Sunoco LP (SUN - Free Report) units have declined 1.5% despite reporting strong earnings for the first quarter of 2022. The downward movement has resulted from the much-increased costs of sales and operating expenses.

Sunoco reported first-quarter earnings of $2.32 per unit, comfortably beating the Zacks Consensus Estimate of 89 cents. The bottom line significantly increased from the year-ago quarter’s $1.60 per unit.

Total quarterly revenues of $5,402 million surpassed the Zacks Consensus Estimate of $4,849 million. The top line also increased from $3,471 million a year ago.

The strong quarterly earnings were driven by higher motor fuel and non-motor fuel sales.

Sunoco LP Price, Consensus and EPS Surprise

 

Sunoco LP Price, Consensus and EPS Surprise

Sunoco LP price-consensus-eps-surprise-chart | Sunoco LP Quote

Segmental Performance

Sunoco reports financial results through two reportable segments — Fuel Distribution and Marketing, and All Other.

Fuel Distribution and Marketing: Total gross profit from the segment increased to $390 million from $317 million in the comparable period of 2021 primarily due to higher motor fuel sales.

All Other: The unit reported a gross profit of $40 million versus $34 million in the comparable period of 2021. The year-over-year increase can be attributed to higher non-motor fuel sales.

In terms of volumes, the partnership sold 1.8 billion gallons of fuel in the reported quarter, marginally up year over year, owing to the energy demand recovery from the coronavirus pandemic. Motor fuel gross profit per gallon was 12.4 cents for the quarter versus the year-ago level of 10.3 cents.

Distribution

For the quarter ended Mar 31, 2022, Sunoco declared a quarterly cash distribution of 82.55 cents per unit or $3.3020 on an annualized basis. Markedly, the distribution was flat on a sequential basis. The trailing 12 months’ cash coverage was 1.66X.

Adjusted distributable cash flow was $142 million in the first quarter, reflecting an increase from the year-ago quarter’s $108 million.

Expenses & Capital Expenditure

The total cost of sales and operating expenses for the reported quarter surged to $5,143 million from $3,267 million a year ago.

The partnership incurred a gross capital expenditure of $26 million for the reported quarter, comprising $21 million in growth capital and $5 million in maintenance capital.

Balance Sheet

As of Mar 31, 2022, Sunoco had cash and cash equivalents of $104 million, sequentially up from $25 million. At the first-quarter end, it had net long-term debt of $2,668 million, flat from the fourth-quarter 2021 level. It had a long-term debt to capitalization of 73.9%.

Guidance

For 2022, Sunoco revised its adjusted EBITDA guidance upward to $795-$835 from the previously mentioned $770-$810 million. In 2021, the metric was recorded at $754 million.

The Zack Rank #1 (Strong Buy) partnership continues to expect maintenance and growth capex of $50 and $150 million, respectively, for the year. You can see the complete list of today’s Zacks #1 Rank stocks here.

A Glimpse of Other Players' Q1 Results

Investors interested in the energy sector might consider the following companies that reported solid first-quarter earnings numbers.

TotalEnergies SE (TTE - Free Report) reported first-quarter 2022 operating earnings of $3.40 (€3.03) per share, beating the Zacks Consensus Estimate of $2.79 by 21.9%. The year-over-year improvement was due to an increase in commodity prices.

TotalEnergies is managing long-term debt quite efficiently and trying to keep the same at manageable levels. Its debt-to-capital has been declining over the past few years. Net debt-to-capital was 12.5% at the end of first-quarter 2022, down from 23.7% at the end of first-quarter 2021. As of Mar 31, 2022, cash and cash equivalents were $31,276 million. This was enough to address the borrowings of $16,759 million as of Mar 31, 2022.

Murphy USA Inc. (MUSA - Free Report) announced first-quarter 2022 earnings per share of $6.08, beating the Zacks Consensus Estimate of $2.65. The outperformance can be attributed to a rise in the retail gasoline price and a higher retail margin of 34 cents per gallon, up 51.1% year over year.

Murphy USA remains committed to returning excess cash to its shareholders through continued share buyback programs. The fuel retailer recently approved a repurchase authorization of up to $1 billion, which will commence once the existing $500-million authorization expires and be completed by Dec 31, 2026. The move underscores MUSA’s sound financial position and commitment to rewarding its shareholders.

PDC Energy (PDCE - Free Report) reported adjusted earnings per share of $3.66, comfortably beating the Zacks Consensus Estimate of $3.18. The outperformance resulted from better-than-anticipated production volumes and higher commodity prices.

The company is using the excess cash from a supportive environment to reward investors with dividends and buybacks. As part of that, PDCE’s board of directors declared a quarterly cash dividend of 25 cents per share to its common shareholders. Notably, PDC Energy returned $110 million to its shareholders in the first quarter through dividends and buybacks.