Barclays Reinstates Coverage On Sunoco

Richard Gross of Barclays on Thursday reinstated coverage of Sunoco LP (NYSE: SUN) with an Equal-weight rating and $54 price target following the MACS drop down from parent Energy Transfer Partners (NYSE: ETP) and the Aloha Petroleum acquisition.

“Sunoco benefits from relatively stable cash flows and solid growth visibility,” Gross wrote. “Cash flow stability is supported by long-term, fee-based contracts for a significant portion of its business, consistent fuel margins and the support of a large-cap investment grade parent.”

Gross adds that Sunoco is well positioned to achieve a 12.5 percent growth from a $4.0 billion to $4.5 billion drop down inventory, organic capital expenditure and third-party acquisitions. However, the analyst adds that the company's favorable growth profile is “somewhat reflected” in the partnership's unit price.

Gross states that shares are currently trading at a yield of 4.4 percent, a “sizeable” premium to 6.3 percent peers and 6.6 percent MLP coverage universe.

A $54 price target is based on a 12-month distribution run rate of $2.50 per unit and a 4.6 percent yield.