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Why Is Sunoco LP (SUN) Down 51.2% 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 51.2% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Sunoco’s Earnings and Revenues Beat Estimates in Q4

Sunoco LP reported fourth-quarter 2019 earnings per unit from continuing operations of 75 cents, beating the Zacks Consensus Estimate of 62 cents. In the year-ago quarter, the partnership reported loss from continuing operations of $1.11 per unit.

Quarterly revenues of the partnership totaled $4,098 million, beating the Zacks Consensus Estimate of $3,995 million. Also, the figure improved from $3,877 million recorded in the prior-year quarter.

The strong fourth-quarter results were backed by higher contributions from 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 $243 million from $127 million in the comparable period of 2018, primarily due to higher Motor fuel sales.

All Other: This unit reported gross profit of $42 million compared with $56 million in the comparable period of 2018. The year-over-year decline can be attributed to lower Motor fuel sales.

In terms of volumes, the partnership sold 2.1 billion gallons of fuel in the reported quarter, up 3% year over year. Motor fuel gross profit per gallon was recorded at 9.9 cents in the quarter, lower than the year-ago level of 12.4 cents.

Distribution

For the quarter ended Dec 31, 2019, Sunoco declared a quarterly cash distribution of 82.55 cents per unit, or $3.3020 on an annualized basis. Markedly, this distribution is flat on a sequential basis.

Expenses

Total cost of sales and operating expenses in the reported quarter increased to $4,000 million from $3,915 million in the year-ago period.

Capital Expenditure

The partnership incurred gross capital expenditure of $45 million in the quarter under review, including $28 million in growth capital and $17 million in maintenance capital.

Balance Sheet

As of Dec 31, 2019, Sunoco had cash and cash equivalents of $21 million, and a net long-term debt of $2,898 million. Its debt-to-capitalization ratio was 79.3%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 8.86% due to these changes.

VGM Scores

Currently, Sunoco LP has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, 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

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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