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Stifel has maintained a Buy rating on Sunoco shares (NYSE: SUN) and increased the price target to $64 from the previous $62. This adjustment follows the company's second-quarter results for 2024, which surpassed the firm's estimates.
Sunoco also shared insights into its joint venture (JV) strategy, aiming to optimize value through collaborative efforts between commercial teams from Sunoco and Energy Transfer (NYSE:ET).
Sunoco's recent performance has demonstrated resilience across various economic cycles. The addition of NuStar is expected to provide Sunoco with a more extensive and diverse operational footprint. This expansion is anticipated to generate cost and commercial synergies, as well as present new avenues for growth.
Stifel's decision to raise the price target is based on the potential benefits of the JV and the opportunities arising from the integration of NuStar. The firm has also rolled out its 2025 estimates for Sunoco, signaling confidence in the company's long-term prospects.
The strategic moves by Sunoco, including the formation of the JV and the acquisition of NuStar, are designed to enhance the company's market position and create value for the partnership and its stakeholders.
Sunoco has unveiled its Q2 2024 results, marking a strong financial performance with an adjusted EBITDA of $400 million and a distributable cash flow of $295 million. These figures follow significant strategic moves by the company, including the divestiture of 204 convenience stores to 7-11 for $1 billion and the notable $7.3 billion acquisition of NuStar Energy. Furthermore, Sunoco LP has formed a joint venture with Energy Transfer and acquired a refined product terminal in Portland, Maine.
Analysts noted that Sunoco LP issued $1.5 billion in senior unsecured notes, reducing interest expenses by $60 million annually. The company also announced an $87.56 per unit distribution and expects 2024 adjusted EBITDA to be between $1.46 billion and $1.52 billion. The synergy expectations from the NuStar acquisition have been increased to $200 million annually.
InvestingPro Insights
As Sunoco (NYSE: SUN) navigates its strategic ventures and expansion efforts, current InvestingPro data highlights several key financial metrics that could be of interest to investors. With a market capitalization of $6.91 billion, the company's price-to-earnings (P/E) ratio stands at an adjusted 18.4 for the last twelve months as of Q2 2024. This suggests a valuation that investors may weigh against industry averages and future growth prospects.
Further underlining the company's performance, Sunoco has reported a revenue growth of 7.47% in Q2 2024 on a quarterly basis, complemented by a robust EBITDA growth of 33.16% during the same period. This could indicate operational efficiency and a positive trajectory in earnings before interest, taxes, depreciation, and amortization. Additionally, the company boasts a dividend yield of 6.9%, which could be attractive to income-seeking investors, particularly in light of the 3.99% dividend growth observed.
InvestingPro Tips suggest that Sunoco's current price, which is at 78.12% of its 52-week high, coupled with a fair value estimate of $61 by analysts, may present a potential upside for investors. The InvestingPro platform offers further insights, with additional tips related to Sunoco's financial health and investment potential. For those seeking to delve deeper, InvestingPro has a comprehensive list of tips that can help in making informed investment decisions.
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