Oil refiner and marketer
Sunoco Inc.
(
SUN
) has reported bright second-quarter 2012 results, owing to robust
performances from all business units coupled with contributions
from attractive acquisitions and impressive marketing skills.
The company has reported earnings per share (excluding special
items) of $1.22, comfortably beating the Zacks Consensus Estimate
of 47 cents. Comparing year over year, the results also improved
substantially from the prior-year adjusted earnings of 17 cents per
share.
Quarterly revenue came in at $12.23 billion compared with $11.32
billion in the prior-year quarter. The result also breezed past our
projection of $5.9 billion.
Segmental Performance
Refining & Supply:
The segment generated profit of $87 million during the quarter,
against the $44 million loss incurred in the second quarter of
2011, benefiting from improved volumes and margins. Increased oil
pipelines fees and positive effects from acquisitions of 2011 also
boosted the performance.
Realized margin averaged $7.43 per barrel, up from $4.31 per barrel
in the prior-year quarter, while total throughputs declined
approximately 30.8% year over year to 323.5 thousand barrels per
day (MBbl/d).
Retail Marketing:
Quarterly profit for the segment was $73 million, up from $69
million in the year-ago quarter. The upside was primarily due to
better diesel and retail gasoline margins.
Gasoline retail margin in the quarter increased 2.5% year over
year, while that of diesel spiked 23.4% from the prior-year
quarter.
Logistics:
The segment's profit jumped 51.9% year over year to $82 million
attributable to increased realized margins plus a drop in expenses.
Crude oil gross margin in the quarter moved up to 88.7 cents per
barrel from 61.6 cents per barrel in the second quarter of 2011.
Capital Expenditure & Balance Sheet
During the reported quarter, Sunoco incurred a capital expenditure
of about $128 million. As of June 30, 2012, Sunoco had cash and
cash equivalents of $1.88 billion and long-term debt (including
current portion) of approximately $2.55 billion.
Debt-to-capitalization ratio was 59.3%.
Acquisition
Early in the quarter, natural-gas pipeline operator
Energy Transfer Partners L.P.
(
ETP
) announced an agreement to acquire Sunoco for about $5.3 billion.
As per the terms of the agreement, Sunoco shareholders will get
$50.13 in cash or stock for each share they hold. The deal has been
approved by the board of directors of both the companies and is
expected to close by the latter half of 2012.
Our Recommendation
With a favorable view of Sunoco's efforts to exit its refining
business and the company's impending merger with Energy Transfer
Partners, we believe investors will now be more confident in
holding Sunoco shares.
Sunoco currently retains a Zacks #2 Rank, which translates into a
Buy rating for a period of one to three months.
ENERGY TRAN PTR (ETP): Free Stock Analysis
Report
SUNOCO INC (SUN): Free Stock Analysis Report
To read this article on Zacks.com click here.