Strong Buy on Susser Petroleum Partners - Analyst Blog

On Aug 31, Zacks Investment Research upgraded Susser Petroleum Partners L.P. (SUSP) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

This partnership focused on the distribution of motor fuel reported a positive earnings surprise of 2.33% in the second quarter. The long-term expected earnings growth rate for this stock is 8.0%.

Susser Petroleum Partners' earnings per unit in the second quarter were 44 cents, a penny higher than the Zacks Consensus Estimate.

Second quarter revenues were $1.12 billion, a 2.8% increase from $1.09 billion reported in the comparable year-ago quarter. The 5.4% year-over-year increase in gallons sold primarily benefited the results, offset marginally by a decline in the selling price per gallon.

The partnership continues to expand its business through purchase and leaseback transactions. Since its initial public offering in Sep 2012, the partnership has completed the purchase and leaseback of 22 Stripes stores for a cumulative cost of $89.7 million. These 22 stores are expected to generate annual rental income of $7.2 million.

Consistently strong performance also enables Susser Petroleum Partners to reward its unitholders through regular distribution payments. The partnership's current quarterly distribution rate of 45.28 cents reflects a 3.5% sequential increase from 43.75 cents distributed in the first quarter.

The present valuation also makes the partnership attractive. The forward P/E multiple of 17.44% is at a discount of 14.5% to the peer group average of 20.4%. The ROE of the partnership is 36.2%, which is higher than the peer group average of 25.3%.  

The Zacks Consensus Estimate for 2013 has risen 4.1% in the last 30 days to $1.77 per unit, reflecting whopping year-over-year growth of 321.8%. For 2014, the Zacks Consensus Estimate increased 7% in the past 30 days to $1.98 per share, reflecting year-over-year growth of 12.02%.

Besides Susser Petroleum Partners, other operators in the sector having a favorable Zacks Rank are Golar LNG Partners L.P. (GMLP), Western Gas Equity Partners, L.P. (WGP) and Delek Logistics Partners, L.P. (DKL). All of them presently carry a Zacks Rank #2 (Buy).