On Thursday, Stifel changed its rating on Sunoco LP (NYSE:SUN) stock, upgrading it from Hold to Buy, while maintaining a price target of $62.00. The firm highlighted the recent decline in Sunoco's unit price as a key reason for the upgrade, noting a 13% drop since mid-February, which is seen as an attractive opportunity for investors to re-enter the stock.
The analyst from Stifel pointed out that the forthcoming management guidance, which is expected on or before the second quarter 2024 earnings report, may act as a catalyst for Sunoco's unit price. This upcoming guidance is anticipated to give a comprehensive update on the company's outlook for 2024, including its core business, the recently acquired NuStar assets, and the potential for synergies.
According to Stifel, while no changes to the incentive distribution rights (IDR) structure are expected, there is an anticipation that Sunoco will be able to derive additional value from the NuStar assets. Energy Transfer (NYSE:ET) is mentioned as a likely partner in this endeavor.
The firm's stance is based on the belief that the current lower unit price offers a favorable entry point for investors. The update from Sunoco's management is eagerly awaited by the market as it is expected to shed light on the company's strategic direction and financial expectations for the coming year, including the integration and enhancement of NuStar's assets within Sunoco's portfolio.
In other recent news, Sunoco LP has been making significant strides in its operations and growth prospects. The company's recent acquisition of NuStar Energy, a strategic move highlighted by both JPMorgan and Mizuho Securities, is expected to bring about attractive synergies and bolster Sunoco's market position. JPMorgan resumed coverage on Sunoco shares with an Overweight rating, increasing the price target to $61, citing the potential for a more diversified company with greater stability and growth prospects. Mizuho Securities upgraded Sunoco's stock from Neutral to Buy, albeit lowering the price target to $59, reflecting confidence in the company's robust outlook.
Sunoco has also reported a strong start to 2024 with record first-quarter earnings. The company announced an adjusted EBITDA of $242 million, marking a 9% increase from the previous year. This performance was supported by strategic transactions, including the NuStar acquisition and the divestiture of convenience stores. Sunoco also witnessed a 9% increase in volume with over 2.1 billion gallons sold.
Looking ahead, the company has revised its full-year adjusted EBITDA forecast to between $1.46 billion and $1.52 billion, reflecting contributions from recent acquisitions. These recent developments underscore Sunoco's commitment to growth and its strategy to maintain a strong balance sheet for future investments.
InvestingPro Insights
Following the recent upgrade of Sunoco LP (NYSE:SUN) by Stifel to a Buy rating with a maintained price target of $62.00, the InvestingPro real-time data reveals additional insights into the company's financial health and market performance. Sunoco's adjusted market capitalization stands at a robust $4.6 billion, supported by a Price/Earnings (P/E) Ratio of 11.72, which adjusts slightly higher to 12.12 when considering the last twelve months as of Q1 2024. The PEG Ratio for the same period is notably low at 0.59, suggesting potential for growth at a reasonable price.
Despite a revenue decline of 9.67% in the last twelve months as of Q1 2024, the quarterly revenue growth shows a positive uptick of 2.56%. Investors may also find the dividend yield of 6.69% as of the recent ex-date (May 10, 2024) particularly attractive, coupled with a dividend growth of 6.07% in the last twelve months as of Q1 2024. Furthermore, the InvestingPro platform highlights a fair value estimate of $67.65 for Sunoco, which exceeds the current analyst target, indicating potential undervaluation.
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