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Sunoco’s (SUN) Q2 Earnings Miss Estimates, Revenues Beat

Zacks

Sunoco LP SUN recently reported second-quarter 2019 earnings per unit of 43 cents from continuing operations, missing the Zacks Consensus Estimate of 74 cents. Moreover, the bottom line plunged from the year-ago level of 90 cents.

Quarterly operating revenues of the partnership totaled $4,475 million, beating the Zacks Consensus Estimate of $4,323 million. However, the figure declined from $4,607 million recorded in the prior-year quarter.

The weak second-quarter earnings were affected by lower profits from both the segments of the partnership, attributed to lower motor fuel gross profit per gallon. The negatives were partially offset by higher fuel selling volumes in the quarter under review.

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

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 $215 million from $253 million in the comparable period of 2018, primarily due to lower Motor and Non-motor fuel sales.

All Other:This unit reported gross profit of $54 million compared with $57 million in the comparable period of 2018. The year-over-year decline was attributed to lower Motor fuel sales.

In terms of volumes, the partnership sold 2.05 billion gallons of fuel in the reported quarter, up 4% year over year. Motor fuel gross profit per gallon was recorded at 9.1 cents in the quarter, lower than the year-ago level of 9.9 cents.

Distribution

For the quarter ended Jun 30, 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 expenses in the reported quarter decreased to $4,378 million from $4,479 million in the year-ago period. The decline in total expenses is mainly attributed to lower costs related to sale.

Capital Expenditure

The company incurred gross capital expenditure of $31 million in the quarter under review, including $25 million of growth capital and $6 million of maintenance capital.

Balance Sheet

As of Jun 30, 2019, Sunoco had cash and cash equivalents of $36 million, and a long-term debt (including revolving credit) of $2,995 million. Its debt-to-capitalization ratio was approximately 79.4%.

Joint Venture Update

Sunoco closed the joint venture with Energy Transfer LP (ET) on a diesel fuel pipeline. The pipeline will be operated by Energy Transfer, which will deliver diesel with an initial capacity of 30,000 barrels per day from Hebert, TX to a terminal located in Midland, TX. This pipeline is successfully commissioned in August. Sunoco anticipates cash expenditure for this project to be around $50 million.

Guidance

Sunoco expects full-year 2019 operating expenses to be lower than the guided figure of $540 million, owing to the Fulton ethanol plant divestment. The sale of the plant is anticipated to affect the partnership’s gross profit this year.

In 2019, the partnership is planning to allocate around $100 million for growth purposes and $40 million for maintenance.

Zacks Rank and Stocks to Consider

Currently, Sunoco has a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy sector are given below:

NuStar Energy L.P. NS is one of the largest independent liquids terminal and pipeline operators in the United States. Its third-quarter earnings per unit are expected to surge more than 100% year over year. It has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

World Fuel Services Corporation INT is an oil and gas refining and marketing company. The company beat estimates in the trailing four quarters, delivering average positive surprise of almost 16.4%. The company has a Zacks Rank #2 (Buy).

Dril-Quip, Inc. DRQ is a provider of oilfield services for upstream energy companies. In the trailing four quarters, the company delivered average positive earnings surprise of almost 49%. It has a Zacks Rank #2.

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