Sunoco: A Top Defensive Pick for Low Gasoline Prices?

Sunoco LP SUN is now poised to benefit from the investments of more than $6 billion that it has made over the last 18 months. JPMorgan’s Andrew R. Burd maintained an Overweight rating for the company, while reducing the price target from $51 to $48. The analyst identified the company as its “top defensive pick for an era of low gasoline prices.”

Weakness Offer Opportunity

“With drop downs complete, so too is SUN’s operational separation from ETP,” Burd wrote. He said that the 1Q16 performance of Sunoco’s units had been soft in part due to the “uncertainty clouding other Energy Transfer entities.”

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There could be continued volatility till the completion of the proposed merger between Energy Transfer Equity LP ETE and Williams Companies Inc WMB, and until investors gain comfort with the capital program of Energy Transfer Partners LP ETP.

Such occurrences would fade over time, “as investors gain appreciation for the wide separation between SUN and the rest of the Energy Transfer family, and would purchase units on volatility-driven weakness,” Burd commented.