Mizuho raises Sunoco stock target to $68, maintains Outperform

On Thursday, Mizuho (NYSE:MFG) Securities expressed a positive outlook on Sunoco shares, raising the price target to $68 from $66 while keeping an Outperform rating on the stock. Currently trading at $59.13, near its 52-week high of $60.44, Sunoco has delivered an impressive 16.74% return year-to-date. According to InvestingPro data, the company maintains a GOOD Financial Health Score of 2.69, supported by a robust 6% dividend yield. Analysts at Mizuho anticipate that investors will be keenly interested in the details of Sunoco’s recent €500 million acquisition of a European terminal during the company’s first-quarter 2025 update, scheduled for April 30. With a market capitalization of $8.06 billion and trailing twelve months EBITDA of $1.31 billion, Sunoco appears well-positioned for this expansion.

The focus of investor interest is expected to be on the return expectations and the extent to which the terminal’s capacity is under contract. Sunoco’s initial foray into European terminals in 2021 was supported by long-term contracts, which analysts believe provide a clearer view of future cash flows. However, Mizuho suggests that having uncontracted capacity could offer Sunoco the flexibility to optimize fuel management.

Beyond the acquisition, Mizuho’s analysis indicates that Sunoco is well-positioned to continue pursuing mergers and acquisitions aggressively. The firm does not foresee a shift in Sunoco’s strategy towards distribution growth but notes that the company’s incentive distribution rights (IDR) could pose a challenge later in the decade if growth exceeds 5% annually. Trading at an attractive P/E ratio of 9.62, InvestingPro analysis suggests the stock may be undervalued relative to its growth potential. Get access to detailed valuation metrics and 12+ exclusive ProTips about Sunoco with an InvestingPro subscription.

In their commentary, Mizuho analysts stated, "We raise our PT to $68, and believe units undervalued as SUN has not received adequate credit for the quality of its platform." This statement reflects a belief that the market has yet to fully recognize the strength of Sunoco’s business model and its potential for growth.

In other recent news, Sunoco has reported strong financial results for the fourth quarter of 2024, highlighting a significant increase in adjusted EBITDA to $446 million. The company’s full-year adjusted EBITDA grew by 62% to $1.56 billion, driven by strategic acquisitions and a diversified business model. Sunoco’s acquisition of NuStar has notably enhanced its distribution network and contributed to reaching its leverage goal in under six months. Looking ahead, Sunoco has provided optimistic guidance for 2025, projecting an adjusted EBITDA range of $1.9 to $1.95 billion and targeting a 5% distribution increase.

Analyst firms have also weighed in on Sunoco’s performance. Raymond (NSE:RYMD) James has raised its price target to $67, maintaining an Outperform rating, while RBC Capital Markets has reiterated a $64 target, also with an Outperform rating. Both firms highlight Sunoco’s robust core earnings and potential for growth through mergers and acquisitions. Sunoco’s strong balance sheet and financial flexibility have been emphasized as key factors supporting its growth trajectory. These developments underscore Sunoco’s strategic management and operational efficiency in navigating the current economic environment.

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