The Long Case for Sunoco

This week's stock pick is Sunoco (SUN), which comes from the energy sector. My chart work suggests that Sunoco's stock price is bottoming.

Sunoco announced a loss of $59 million, in the first quarter, because a $123 million loss in its refining and supply business. Sunoco's revenue was $12.8 billion in the Q1 2008 quarter An increase from $9.3 billion in Q1 2007.

Sunoco said the loss in its refining business to lower margins and higher expenses. SUN said the lower margins came from higher crude oil prices and lower demand, while the higher expenses came from increased costs for fuel.

All of Sunoco's other business’s had increased earnings in the Q1 2008 quarter compared to a year ago. Sunoco’s chemical business earned $18 million, up from $9 million. Its coke business earned $25 million, up from $11 million, and its logistics business, which consists of its 43 percent stake in Sunoco Logistics, earned $15 million, up from $9 million.

Sunoco Current Market Data & Ratios

Market Cap: 5.44B

P/E: 8.52

Forward P/E: 13.68

Dividend: 0.30

Average Daily Volume: 3.56M

EPS: 5.43

Institutionally Owned: 81%

You can review the Q1 2008 Earnings Call Transcript here. Basically, it was lower margins and higher expenses that caused Sunoco's Q1 loss.

Sunoco, Inc. (Sunoco), through its subsidiaries, is principally a petroleum refiner and marketer and chemicals manufacturer with interests in logistics and cokemaking. Sunoco’s petroleum refining and marketing operations include the manufacturing and marketing of a full-range of petroleum products, including fuels, lubricants and some petrochemicals. Sunoco’s chemical operations comprise the manufacturing, distribution and marketing of commodity and intermediate petrochemicals. The petroleum refining and marketing, chemicals and logistics operations are conducted principally in the eastern half of the United States. Sunoco’s coke making operations are conducted in Virginia, Indiana, Ohio and Vitoria, Brazil.

Sunoco, Inc. Announces Dividend Increase Feb. 7, 2008

Sunoco, Inc. announced that its Board of Directors has approved a 9% increase to the quarterly dividend to $0.30 per share. The quarterly dividend is payable on June 10, 2008, to shareholders of record at the close of business on May 9, 2008.

Click here to review the trading software we used in determining our trade position.

Disclosure: The author is long SUN.

Comments

[stephenrosenman]

You still haven't told me why I should buy Sun.

[jjason]

I disagree. SUN has a loss of $.50 a share in 1Q08 and has had a decrease in eps for the last three quarters. Four of the refiners that I track are seeing lower margins and lower net profits AND consumers are buying less gasoline. (The consumer is, FINALLY, cutting back on consumption!)

As this recession continues, we will probably see the refiners losing more money and share prices will go lower.

I live in PA. Three weeks ago home heating oil was at $3.499 per gallon. I told my girlfriend that it would cost us $700.00 to buy 200 gallons. She said " To hell with them."

We are going solar. We have two solar bags to heat water. They can heat the water to 120 to 130 degrees. I recommend them to anyone who has a roof that gets direct sunlight. You can buy them from stores that sell camping gear.

Also, I am building a solar collector that will heat a part of my 1,200 square foot house. I tell all my friends about it.

Finally, I only invest in companies that have dividend yields over seven percent. Any company that can pay their CEO's , directors and executives millions of dollars in compensation can (and should) pay shareholders more than 2 or 3 percent in dividends.

[lsuavecito]

>>>Any company that can pay their CEO's , directors and executives millions of dollars in compensation can (and should) pay shareholders more than 2 or 3 percent in dividends. <<<

EXCELLENT thinking. The $$ some of these clowns steal is ludicrous, legalized thievery.

[twinnkie]

in my opinion one the best buy of 08-09

[Invest2Success]

We closed our long position on Sunoco a week after we posted a buy on it for several reasons. Our picks are first based on technical analysis, second on a fundamental basis. Sunoco was showing a low risk high reward trade setup on our chart scan, but as the market goes, the art of forecasting and speculation if more an art than a science.

[Invest2Success]

We closed our long position on Sunoco a week after we posted a buy on it for several reasons. Our picks are first based on technical analysis, second on a fundamental basis. Sunoco was showing a low risk high reward trade setup on our chart scan, but as the market goes, the art of forecasting and speculation if more an art than a science.