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Sunoco LP (NYSE:SUN) reported strong results for the first quarter.
The stock has underperformed since March, down 22%, despite the company's "fundamental tailwinds," according to Mizuho Securities.
The Sunoco Analyst: Gabriel Moreen upgraded the rating for Sunoco from Neutral to Buy. Moreen also raised the price target from $60 to $59.
The Sunoco Thesis: While there were some concerns around the NuStar acquisition being a good fit for Sunoco's fuel distribution footprint, this does not justify the stock's underperformance, Moreen said in the upgrade note.
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As a result, the current valuation of the stock does not reflect the robustness of Sunoco's outlook, which includes "strong EBITDA growth in distribution," synergy upside from the NuStar acquisition, "a potentially IG-worthy balance sheet," and a growing yield, Moreen stated.
There could be upside to the company's synergy target from the NuStar acquisition of around $150 million, he added.
Moreen adjusted “FY24-26 adj EBITDA estimates” to reflect first-quarter 2024 results and the close of Sunoco’s NuStar acquisition.
SUN Price Action: Shares of Sunoco had declined by 0.68% to $50.55 at the time of publication on Tuesday.
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Posted In: SUN
