On Monday, RBC Capital Markets maintained its Outperform rating on shares of Sunoco LP (NYSE: SUN) and increased the price target from $63.00 to $64.00. Currently trading at $54.14 with a market capitalization of $7.36 billion, Sunoco has received a strong consensus rating from analysts, with targets ranging from $60 to $66.
The firm's analyst cited updated estimates and the potential for growth following Sunoco's strategic moves, including its acquisition of NuStar and a joint venture with Energy Transfer (NYSE:ET). According to InvestingPro analysis, the stock appears to be trading above its Fair Value.
The analyst from RBC Capital Markets has revised upward the financial forecasts for Sunoco, expecting the company to present a promising 2025 outlook at its analyst meeting scheduled for today. With a current trailing twelve-month EBITDA of $826 million and an attractive dividend yield of 6.47%, the company shows strong income potential.
The updated projections include Adjusted EBITDA figures for the years 2024, 2025, and 2026 at $1,573 million, $1,913 million, and $1,985 million, respectively. These figures are an increase from the previous estimates of $1,528 million, $1,850 million, and $1,932 million. For detailed financial forecasts and comprehensive analysis, investors can access the full Pro Research Report on InvestingPro.
The distribution cash flow (DCF) estimates have also been adjusted to reflect higher expectations, now forecasting $1,177 million for 2024, $1,517 million for 2025, and $1,580 million for 2026. These figures are up from the earlier projections of $982 million, $1,103 million, and $1,162 million, respectively. However, the distribution per unit (DPU) forecast remains unchanged at $3.50 for 2024, $3.64 for 2025, and $3.78 for 2026.
Moreover, the analyst expects Sunoco to maintain its annual growth capital expenditures (capex) at $300 million for 2024 and $400 million for each of the following two years. The company is anticipated to achieve a Debt/EBITDA ratio of 4.5x at the end of 2024, improving to 3.6x by the end of 2025, and further to 3.4x by the close of 2026.
InvestingPro's Financial Health Score of 2.44 (FAIR) suggests balanced operational performance, with particular strength in price momentum metrics. Subscribers can access over 30 additional financial metrics and exclusive ProTips for deeper analysis.
The positive outlook from RBC Capital Markets reflects confidence in Sunoco's strategic initiatives and their potential to drive growth, as well as the company's financial management. The analyst meeting today is expected to shed more light on the company's future plans and financial targets.
In other recent news, Sunoco LP reported a record third-quarter adjusted EBITDA of $470 million, demonstrating a strong performance despite one-time expenses. The energy partnership also maintained its quarterly distribution at $0.8756 per unit and reported a healthy coverage ratio of 2.3x for the quarter.
Sunoco's executives expressed their confidence in meeting the 2024 EBITDA guidance and anticipate a strong performance into 2025. The company also invested a total of $93 million in growth and maintenance capital during the quarter.
Despite some uncertainty due to FERC announcements, Sunoco's Fuel Distribution segment achieved an 8% year-over-year increase in adjusted EBITDA, reaching $253 million. The integration of NuStar assets has proven beneficial, with strong EBITDA figures reported for the Pipeline System and Terminal segments.
Sunoco is also exploring further growth and acquisitions in the fuel distribution and midstream sectors. These recent developments underscore Sunoco LP's financial health and strategic positioning in the energy sector.
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