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Here's Why It is Worth Investing in Sunoco (SUN) Stock Now

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Sunoco LP (SUN - Free Report) has gained 43.8% in the past six months compared with the industry’s 31.2% growth.

The Zacks Consensus Estimate for Sunoco’s 2024 earnings per share (EPS) is pegged at $4.89. SUN currently has a Zacks Style Score of B for Value.

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What’s Favoring the Stock?

Strategic Acquisitions and Divestitures: The Zacks Rank #1 (Strong Buy) company's partnership announced strategic moves, including the acquisition of NuStar Energy L.P. and European liquid fuels terminals and the divestiture of convenience stores to 7-Eleven Inc. These transactions are poised to optimize Sunoco's asset portfolio, enhance its market presence in strategic locations and focus on its core operations, thus potentially leading to improved profitability and efficiency.

Robust Volume Growth: Sunoco reported a significant increase in fuel volume sold, achieving more than 2.2 billion gallons in the fourth quarter of 2023, which marked the highest in the partnership's history. This 11% increase from the previous year underscores Sunoco's strong market demand and effective distribution network. Such volume growth is a positive indicator of the partnership's operational strength and market acceptance.

Solid Financial Performance With Growth Potential: Sunoco reported a record financial performance for 2023, with an 8% increase in fuel sales volume and a 5% increase in adjusted EBITDA. The partnership's guidance for 2024 adjusted EBITDA of $975 million to $1 billion underscores its confidence in sustained growth and profitability. The expected range suggests a steady operational and financial outlook, excluding the impact of the NuStar acquisition, which could provide additional upside once integrated.

Strategic Capital Expenditure: Sunoco's disciplined approach to capital expenditure, focusing on both growth and maintenance, demonstrates its commitment to sustainable growth and operational excellence. The allocation of $145 million for growth capital expenditures in 2023 supports future profitability and competitiveness.

Distribution Strength and Liquidity: The declaration of a quarterly distribution of 84.20 cents per unit reflects Sunoco's commitment to delivering shareholder value and its ability to generate substantial distributable cash flow. As of Dec 31, 2023, SUN maintained significant liquidity with $1.1 billion available under its $1.5 billion revolving credit facility and a leverage ratio of net debt to adjusted EBITDA of 3.7 times. Sunoco is well-positioned to navigate market fluctuations and invest in growth opportunities.

Other Stocks to Consider

Investors interested in the energy sector might look at the following companies that also presently sport a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Valaris (VAL - Free Report) is the industry leader in offshore drilling services across all water depths and geographies. Operating a high-quality rig fleet of ultra-deepwater drillships, versatile semisubmersibles and modern shallow-water jackups, the company has experience operating in nearly every major offshore basin.

The Zacks Consensus Estimate for VAL’s 2024 EPS is pegged at $4.75. Valaris has witnessed upward earnings estimate revisions for 2024 in the past 60 days. VAL’s 2024 earnings are expected to soar 118.5% year over year.

Murphy USA Inc. (MUSA - Free Report) is a leading independent retailer of motor fuel and convenience merchandise in the United States.

The Zacks Consensus Estimate for MUSA’s 2024 EPS is pegged at $25.58. The company has a Zacks Style Score of B for Value and Growth. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

Energy Transfer (ET - Free Report) is a publicly traded limited partnership focused on diverse energy assets in the United States. The company’s core operations involve natural gas midstream services, transportation, storage, crude oil facilities and marketing assets.

The Zacks Consensus Estimate for ET’s 2024 EPS is pegged at $1.44. The company has witnessed upward earnings estimate revisions for 2024 in the past 30 days. ET’s 2024 earnings are expected to rise 32.1% year over year.


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