Sunoco LP (SUN) closed at $72.94 on Oct. 27, down 1.79 percent, underperforming a broad market rally as the S&P 500 gained 0.6 percent and the Nasdaq rose 1.18 percent. Over the past month, SUN has fallen 1.54 percent while the energy sector climbed 7.33 percent—a significant relative lag that has left the master limited partnership trading at a steep discount to peers.
The stock's valuation is the story. SUN trades at a 6.93 forward P/E—a 40 percent markdown to the sector's 11.52 average. Analysts expect fourth-quarter EPS of $2.94, a 359 percent jump year-over-year, with full-year EPS projected at $10.60, up 365 percent. Revenue is forecast at $16.45 billion this quarter (up 173 percent) and $57.42 billion annually (up 128 percent).
The earnings report due Nov. 3 will be a test of whether these forecasts hold. Over the past 30 days, the consensus EPS estimate has been revised upward 10.65 percent, signaling that analyst confidence is rising. The stock currently holds a Zacks Rank of 3 (Hold).
Sunoco operates in the Oil and Gas—Refining and Marketing—Master Limited Partnerships industry, which ranks 22nd among over 250 industry groups (top 9 percent). Industries in the top 50 percent historically outperform the bottom half by a 2-to-1 margin.
