Sunoco Moved to Buy at Mizuho

By Sam Boughedda

On Friday, Mizuho analyst Gabriel Moreen upgraded Sunoco (NYSE:) shares to Buy from Neutral in a research note but lowered the firm’s price target on the stock to $44 from $46.

“SUN has been a relative laggard versus the rest of our coverage YTD (-11.8% vs. +5.7%, respectively), which we attribute to concerns about how rising fuel prices could impact SUN’s wholesale margins. More recently, the specter of demand destruction has also begun to weigh on sentiment,” wrote the analyst. “Yet, SUN’s flexible business model should prove resilient and rising prices/demand destruction are mutually exclusive over the long-term. In the aftermath of SUN’s -21% unit price decline since February 1, we view its equity as attractive, yielding ~9.1%.”

Moreen said the company balance sheet also remains “well-positioned to continue acquiring third-party assets.”

“One of the benefits of SUN’s balance sheet (which we expect to improve as recent acquisitions are absorbed) is that it can remain competitive with respect to M&A. Recent acquisitions (NS/Cato & Gladieux) have helped diversify SUN’s income streams away from pure fuel distribution and will help broaden its inorganic opportunity set.”