Oil refiner and marketer Sunoco Inc. (SUN) announced plans to buy back up to $500 million of its common stock, joining many others who are returning cash to shareholders.
Sunoco – the general partner and 34% stakeholder in crude oil pipelines/terminals operator Sunoco Logistics Partners L.P. (SXL) – says the value of its stock is significantly undervalued in view of the recent market downturn. As a result, the company’s board has approved a share repurchase program pursuant to an existing authorization.
According to Sunoco, the buyback plan highlights the downstream operator’s commitment to create value for shareholders, while still allowing the flexibility to continue pursuing growth in its retail and logistics businesses.
As at the end of the second quarter, Sunoco had about 121.6 million shares outstanding. A share repurchase at the company would lead to lower number of outstanding shares, escalating its earnings per share ratio, even if profits remain the same.
Sunoco reported last week that its second quarter earnings per share (excluding special items) of 40 cents missed the Zacks Consensus Estimate of 49 cents and deteriorated 69.5% from the prior-year adjusted earnings of $1.31. Quarterly revenue came in at $12.02 billion compared with $9.59 billion in the prior-year quarter and was 37.4% above our projection.
Philadelphia, Pennsylvania-based Sunoco is a leading independent refiner and marketer of petroleum products. The company is also a major chemicals manufacturer and has interests in logistics and cokemaking facilities.
Its operations include two refineries having a combined capacity of 505,000 barrels per day. Sunoco’s retail marketing operations include more than 4,900 retail sites in 24 states, primarily in the East Coast and Midwest regions of the country.
Sunoco – which has an 81% ownership interest in metallurgical coke manufacturing firm SunCoke Energy Inc (SXC) – currently retain a Zacks #3 Rank, which translates into a short-term Hold rating.
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