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Earnings Preview: Sunoco Logistics

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Philadelphia-based Sunoco Logistics Partners L.P. , a master limited partnership (MLP), is scheduled to release its third-quarter 2012 earnings after the markets close on November 7, 2012.

Second Quarter Recap

The partnership announced a jump in its second quarter 2012 profits, driven by strong demand for its crude oil business.

The partnership’s diluted earnings per unit (“EPU”) came in at $1.28, significantly ahead of the Zacks Consensus Estimate of 72 cents and the year-ago period profit of 80 cents. Revenues of $3,318.0 million were up 36.7% from the second quarter of 2011 and also beat the Zacks Consensus Estimate by 3.9%.

Importantly, the partnership raised its quarterly distribution by 9.9% sequentially and 16.0% year over year to 47 cents per unit or $1.88 per unit annualized, representing the twenty-ninth consecutive quarterly distribution increase. Distributable cash flow increased 56.6% year over year to a record $166.0 million.

Estimate Revisions Trend


In the last 30 days, out of the total 9 estimates, only 1 was revised upward for the third quarter of 2012. Also, for the fourth quarter of 2012, out of the total 8 estimates, only 1 upward revision was witnessed, while there were no downward revisions over the same time frame. For the third quarter, none of the estimates witnessed any movement in the last 7 days. For the full year 2012, 2 out of the 9 estimates moved up over the last 30 days.


Over the last 7 days, the current Zacks Consensus Estimate has remained unchanged for the third quarter of 2012. The Zacks Consensus Estimate for the third quarter 2012 increased by 2 cents to 84 cents from 82 cents per share in the past 30 days. For full year 2012, the estimate increased by 7 cents to $3.74 over the past 30 days while it increased 4 cents over the past 7 days.

Surprise History

With respect to earnings surprise, the results of the company surpassed our expectations in each of the last four quarters. The earnings surprise in the last four quarters ranged from 33.87% to 63.89%. The average surprise over the last four quarters remained at 50.52%.

Our Recommendation

In 2010, MarkWest Energy Partners L.P. teamed up with Sunoco Logistics to build a distribution system to transport ethane produced in the Marcellus Shale Basin (in Northeastern U.S.) to markets along the Gulf Coast.

The partnership currently carries a Zacks #1 Rank, which is equivalent to a short-term Strong Buy rating. Considering the fundamentals, we maintain our long-term Outperform recommendation on the stock.


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