UPDATE: Bank of America Downgrades Sunoco Logistics Partners on Valuation

In a report published on Tuesday, Bank of America analyst Gabe Moreen downgraded Sunoco Logistics Partners SXL from Buy to Neutral and lowered the price target on the company from $68 to $65.

In the report, Bank of America stated, "We downgrade units of SXL from Buy to Neutral for three reasons: first, SXL has outperformed the Alerian MLP Index (AMZ) by 11.3% YTD (SXL up 23.5% versus the AMZ up 12.2%). SXL's robust cash distribution coverage and distribution growth have justified its outperformance but we view SXL's current premium valuation versus the group as fair. Second, compressed crude oil spreads which could put pressure on SXL's logistics earnings. Crude oil spreads have continued to compress which could be a negative headwind for SXL's crude acquisition and marketing segment in 2Q13 and beyond. YTD the LLS/WTI and Brent/WTI spreads have compressed 58/69%, respectively. While SXL may be able to take advantage of regional basis spreads, we do not see outsized crude oil marketing earnings as sustainable. Third, we see potential for SXL to participate in M&A, which could moderate cash distribution growth and introduce financing needs."

Sunoco Logistics Partners closed on Monday at $61.44.