Zacks Industry Outlook Targa, Sunoco and CrossAmerica Partners

Zacks09-09

For Immediate Release Chicago, IL – September 9, 2024 – Today, Zacks Equity Research discusses, Targa Resources TRGP, Sunoco LP SUN and CrossAmerica Partners LP CAPL. Industry: Refining and Marketing ...

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Although strong demand and light product inventories should continue to support the sector, most operators anticipate subdued margins for the remainder of 2024.Additionally, rising costs driven by persistent inflation are further squeezing profits. However, the defensive nature of these stocks, their fee-based business models, and built-in inflation mitigation measures provide some resilience in a volatile market. For those interested, we highlight Targa Resources, Sunoco LP and CrossAmerica Partners LP.A Stable Investment: Amid the current volatile oil market driven by demand swings and geopolitical tensions, master limited partnerships  present a safer investment o","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4581":"高盛持仓","IVV":"标普500指数ETF","OEX":"标普100","BK4504":"桥水持仓",".SPX":"S&P 500 Index","TRGP":"Targa Resources Corp","BK4138":"石油与天然气的炼制和营销","SUN":"太阳石油","BK4590":"PTP","SDS":"两倍做空标普500ETF","BK4144":"石油与天然气的储存和运输","BK4534":"瑞士信贷持仓","BK4585":"ETF&股票定投概念","SSO":"两倍做多标普500ETF","SH":"标普500反向ETF","SPXU":"三倍做空标普500ETF","BK4559":"巴菲特持仓","BK4550":"红杉资本持仓","UPRO":"三倍做多标普500ETF","BK4588":"碎股","CAPL":"Crossamerica Partners LP","SPY":"标普500ETF","OEF":"标普100指数ETF-iShares","VOO":"Vanguard标普500ETF"},"translate_title":"Zacks行业展望Targa、Sunoco和CrossAmerica Partners","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"TRGP":1,"CAPL":1,"SUN":0.9,"VOO":0.86,"SPY":0.86,"ESmain":0.6,"UPRO":0.6,"SSO":0.6,"SPXU":0.6,"SH":0.6,"SDS":0.6,"OEX":0.6,"OEF":0.6,"IVV":0.6,".SPX":0.6},"content_text":"For Immediate Release\nChicago, IL – September 9, 2024 – Today, Zacks Equity Research discusses, Targa Resources TRGP, Sunoco LP SUN and CrossAmerica Partners LP CAPL.\nIndustry: Refining and Marketing - MLP\nLink: https://www.zacks.com/commentary/2332556/watch-for-these-3-refining-marketing-mlp-stocks-trgp-sun-capl\nIn recent quarters, fuel margins for companies in the Zacks Oil and Gas - Refining & Marketing MLP industry have declined, falling significantly below the peak levels seen in 2022. Although strong demand and light product inventories should continue to support the sector, most operators anticipate subdued margins for the remainder of 2024.\nAdditionally, rising costs driven by persistent inflation are further squeezing profits. However, the defensive nature of these stocks, their fee-based business models, and built-in inflation mitigation measures provide some resilience in a volatile market. For those interested, we highlight Targa Resources, Sunoco LP and CrossAmerica Partners LP.\nIndustry Overview\nMaster limited partnerships (or MLPs) differ from regular stocks since interests in them are referred to as units, and unitholders (not shareholders) are partners in the business. Importantly, these low-risk hybrid entities bring together the tax benefits of a limited partnership with the liquidity of publicly traded securities that earn a stable income. The assets owned by these partnerships are typically oil and natural gas pipelines and storage/infrastructure facilities.\nThe Zacks Oil and Gas - Refining & Marketing MLP industry is a sub-sector of this business model. These firms operate refined product terminals, storage facilities and transportation services. They are involved in selling refined petroleum products (including heating oil, gasoline, residual oil, jet fuel, etc.) and a plethora of non-energy materials (like asphalt, road salt, clay and gypsum).\n3 Trends Defining Oil and Gas - Refining & Marketing MLP Industry's Future\nRefining Margins Under Pressure: Refining margins, while still healthy, have weakened from the exceptional highs of 2022, with crack spreads narrowing due to lower refined product prices relative to crude oil. Elevated inventories and demand uncertainties pose additional risks to profitability. Despite sanctions and price controls, Russia's shift of oil exports to India and China has prevented the anticipated tightening of global product supplies. This dynamic has contributed to the recent decline in refinery margins, weighing on the earnings of downstream companies.\nA Stable Investment: Amid the current volatile oil market driven by demand swings and geopolitical tensions, master limited partnerships (MLPs) present a safer investment option. MLPs offer attractive returns with lower risk by focusing on assets like oil and natural gas pipelines and storage facilities that generate steady fee-based revenues through long-term contracts. These contracts reduce direct exposure to commodity price fluctuations, providing consistent cash flow across market cycles. Many agreements also operate on a take-or-pay basis, guaranteeing payment to MLPs regardless of transportation volumes.\nSupply Chain Challenges: Despite a generally positive energy outlook and improved demand, the industry faces ongoing challenges from supply-chain disruptions and rising costs. Key issues such as increased transportation expenses, driver shortages, and labor constraints have hindered MLPs (or energy infrastructure providers) from delivering packaged volumes to customers. These headwinds, combined with the difficulty in passing increased costs onto clients, have pressured profitability. Unfortunately, these challenges are expected to persist in the near term, affecting the midstream sector’s financial performance.\nZacks Industry Rank Indicates Bearish Outlook\nThe Zacks Oil and Gas – Refining & Marketing MLP is a six-stock group within the broader Zacks Oil – Energy sector. The industry currently carries a Zacks Industry Rank #162, which places it in the bottom 35% of more than 250 Zacks industries.\nThe group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates fairly dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.\nDespite the dim near-term prospects of the industry, we will present a few stocks that you may want to consider for your portfolio. But it’s worth taking a look at the industry’s shareholder returns and current valuation first.\nIndustry Outperforms Sector & S&P 500\nThe Zacks Oil and Gas – Refining & Marketing MLP industry has fared better than the broader Zacks Oil - Energy Sector as well as the Zacks S&P 500 composite over the past year.\nThe industry has gained 47.5% over this period in contrast to the broader sector’s decrease of 2.9%. Meanwhile, the S&P 500 has gone up 22.5%.\nIndustry's Current Valuation\nSince midstream-focused oil and gas partnerships use fixed-rate debt for most of their borrowings, it makes sense to value them based on the EV/EBITDA (enterprise value/ earnings before interest tax depreciation and amortization) ratio. This is because the valuation metric takes into account not just equity but also the level of debt. For capital-intensive companies, EV/EBITDA is a better valuation metric because it is not influenced by changing capital structures and ignores the effect of non-cash expenses.\nOn the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA) ratio, the industry is currently trading at 10.10X, significantly lower than the S&P 500’s 18.52X. It is, however, well above the sector’s trailing 12-month EV/EBITDA of 3.08X.\nOver the past five years, the industry has traded as high as 13.57X and as low as 5.78X, with a median of 9.02X.\n3 Stocks in Focus\nCrossAmerica Partners LP.: Headquartered in Allentown, PA, wholesale distributor of motor fuels CrossAmerica Partners’ variable rate margins helped it offset the loss in volumes during the pandemic. Further, CAPL’s recent acquisitions of retail and wholesale assets provide it with a wider reach and scale.\nOver the past 30 days, CrossAmerica Partners saw the Zacks Consensus Estimate for 2024 jump 206.3%. The firm, which pays out 52.50 cents quarterly distribution to yield nearly 11%, beat the Zacks Consensus Estimate for earnings thrice in the trailing four quarters and missed in the other. CAPL stock, carrying a Zacks Rank #2 (Buy), has edged down 1.7% in a year.\nYou can see the complete list of today’s Zacks #1 Rank stocks here.\nTarga Resources: It is a leading provider of integrated midstream services in North America. The Houston, TX-based operator primarily derives its revenues from gathering, compressing, treating, processing and selling natural gas. Targa Resources also provides services associated with natural gas liquids, including those to liquefied petroleum gas exporters, and crude oil.\nThe Zacks Consensus Estimate for Houston, TX-based Targa Resources indicates 60.7% earnings per share growth over 2023. The firm, which pays out 75 cents quarterly dividend to yield just over 2%, has a VGM Score of B. Valued at around $32.2 billion, this Zacks Rank #3 (Hold) stock has surged 75.2% in a year.\nSunoco LP: It participates in the transportation and supply phase of the U.S. petroleum market across a number of states. It also focuses on motor fuel distribution to convenience stores, independent dealers and commercial customers. SUN pays out 87.56 cents quarterly distribution ($3.5024 per unit annually), which gives it a 6.7% yield at the current unit price.\nOver the last 30 days, the Zacks Consensus Estimate for Sunoco’s 2024 earnings has moved up 12.6%. The 2024 Zacks Consensus Estimate for SUN indicates 124.9% year-over-year earnings per unit growth. Valued at around $8 billion, this Zacks #3 Ranked partnership has gained 15.8% in a year.\nWhy Haven't You Looked at Zacks' Top Stocks?\nSince 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.\nToday you can access their live picks without cost or obligation.\nSee Stocks Free >>\nZacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.\nMedia Contact\nZacks Investment Research\n800-767-3771 ext. 9339\nsupport@zacks.com\nhttps://www.zacks.com\nPast performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance  for information about the performance numbers displayed in this press release.\nWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report\nSunoco LP (SUN) : Free Stock Analysis Report\nTarga Resources, Inc. (TRGP) : Free Stock Analysis Report\nCrossAmerica Partners LP (CAPL) : Free Stock Analysis Report\nTo read this article on Zacks.com click here.\nZacks Investment Research","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2466040154"}