Sunoco Logistics Partners LP (SXL) has announced a public offering of 7.7 million common units. The energy pipelines and terminals operator added that it has provided underwriters an option of buying an additional 1.155 million units.
Sunoco Logistics mentioned that it plans use the net proceeds from the offering to repay debt under its $1.5 billion revolving credit facility and for other corporate purposes.
Considering the latest closing price of the stock at $49.96 per unit, the offering is expected to generate about $385 million for Sunoco Logistics. However, the offering was not well received by investors. In the after-hours trading session, the stock lost over 4%.
Philadelphia-based Sunoco Logistics is a master limited partnership that acquires, owns and operates a geographically diverse portfolio of refined product and crude oil pipelines and terminal facilities. The partnership appears to be well positioned for growth and has solid DCF coverage. Moreover, some of its organic projects, which are nearing start-ups, are expected to be immediately accretive to the partnership’s earnings and distributable cash.
Additionally, Sunoco Logistics has reported good numbers in the past two quarters and beaten the Zacks Consensus Estimate for earnings. For the second quarter, the partnership reported earnings of 53 cents per share, substantially higher than the Zacks Consensus Estimate of 36 cents, resulting in a 47.22% positive surprise. Current quarter and current year estimates are also moving north for the partnership, indicating bullishness on the stock.
Currently, Sunoco Logistics sports a Zacks Rank #1 (Strong Buy), indicating that it is expected to significantly outperform the broader U.S. market in the next one to three months.
One can also consider other Zacks Ranked #1 stocks from the broader energy sector like Patterson-UTI Energy Inc. (PTEN), Cameron International Corporation (CAM) and Sasol Ltd. (SSL).
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