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Summary

  • The company beat 2Q consensus on the top line but missed on the bottom line.
  • We can’t fight the fact that there’s an acquisition in the works, which flaws our bear thesis.
  • We were wrong about this quarter, but its acquirer could become quite the play in the convenience store and fuel market.

Susser Holdings (NYSE:SUSS) managed to post 2Q earnings that were $0.66 a share (coming in well below $0.93 consensus) and revenues were $1.87 billion (marginally beating consensus). The company had same-store merchandise sales up 4%, compared to 2.2% in 2Q 2013. It also noted that its Laredo Taco Company was a key driver of its same-store performance.

Shares are up 60% since our article from last September. We liked the company but weren't a fan of the valuation. As we noted back then,

Although the company does have the opportunity to expand quicker having spun off its distribution business, and it has a unique business model that includes operating restaurants, the stock has already seen a nice run up since the spinoff.

But valuation doesn't matter when you have an acquisition offer. Energy Transfer Partners (NYSE:ETP) is paying a 40% pre-announcement premium to buy Susser.

The move gives Energy Transfer a chance to spin out its retail marketing business. That's what they'll use Susser Petroleum Partners (the MLP) for. The company has the opportunity to expand its footprint with Susser's Texas locations.

Source: Update: Susser Holdings Earnings