Sunoco Logistics Upped to Strong Buy on Robust Q2 Earnings - Analyst Blog

On Aug 12, Zacks Investment Research upgraded energy pipelines and terminals operator, Sunoco Logistics Partners LP ( SXL ), to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

The operating environment and growth prospects seem encouraging for Sunoco, as reflected by its better-than-expected second-quarter 2014 earnings. The partnership is also expected to impress when it reports third-quarter results.

Sunoco reported second-quarter results on Aug 6. Earnings per unit came in at 53 cents surpassing the Zacks Consensus Estimate of 36 cents by 47.2%. The beat was on the back of improved performance by almost all its business segments. Moreover, the partnership was able to reduce its year-over-year operating expenses by 8% to $23 million.

With low-risk and stable cash flow-generating energy infrastructure assets, Sunoco offers investors an opportunity to capture income growth through steadily rising cash distributions. This is reflected in its improved quarterly distribution of 36.5 cents per unit ($1.46 per unit annualized), signifying a 5% sequential and 22% year-over-year hike.

Owing to these positive developments, the tendency for an upward estimate revision has been obvious in recent times. In fact, the Zacks Consensus Estimate for the third quarter has increased by almost 9% to 37 cents per unit over the last 30 days. Additionally, for 2014, more than half of the estimates (5 out of 7) were revised higher over the same time frame, lifting the Zacks Consensus Estimate by 6.7% to $1.59 per unit.

Other Stocks to Consider

Apart from Sunoco, one can consider other players in the same industry like Delek Logistics Partners LP ( DKL ), Plains All American Pipeline LP ( PAA ) and Targa Resources Partners LP ( NGLS ). All these stocks carry a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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