Updated from 12:28 p.m. EDT

A cold snap in the Northeast and improved refining margins helped drive up

Sunoco's

(SUN) - Get Report

first-quarter earnings, which greatly exceeded Wall Street's expectations.

Valero

(VLO) - Get Report

also said it benefited from improved profit margins, surpassing analysts' estimates by a penny.

Sunoco, the third-largest independent refiner in the U.S., said its net income, including income from discontinued operating, surged threefold, to $78 million, or 87 cents a diluted share, from $19 million, or 21 cents a diluted share, in the year-earlier quarter. Not including income from discontinued operations, Sunoco of Philadelphia recorded operating income of $67 million, or 75 cents a diluted share, in the first quarter.

Wall Street had expected earnings of 55 cents a share, according to a survey conducted by

First Call/Thomson Financial

.

Revenues also skyrocketed, increasing 65% to $3.2 billion in the period.

The gains, however, failed to excite investors. Sunoco was down Thursday afternoon 3/16, or 0.7%, to 27 7/8. (Sunoco finished down 1/16, or 0.2%, at 28.)

Chris Stavros, an analyst at

PaineWebber

, said the small increase in Sunoco's stock price did not reflect the company's strong fundamentals and earnings outlook.

"I think they are just involved in a sector that doesn¿t get a lot of attention," said Stavros, who rates the company a buy. "Because of their small market cap, there's a lack of interest and it's very tough to make big news."

But Stavros said he expected Sunoco, which has a market capitalization of $2.5 billion, to post earnings in excess of $3 a share for 2000, more than a sixfold increase compared with 1999. Stavros also added he would be upping his second and third quarter earnings estimates, but could not yet say by how much.

Tyler Dann, an analyst at

Bank of America

, said he was pleased with the company's fundamentals, but noted that the stock was one of the most fully valued in its sector. Dann rates Sunoco a market perform, the equivalent of a hold, and has not done any underwriting for the company.

Dann attributed the sharp jump in earnings to cold weather in the Northeast, which drove up demand for heating oil.

"Sunoco was probably the most obvious beneficiary of the cold weather in the Northeast," Dann said. "They were able to capitalize on the winter heating oil squeeze more than we expected."

More than 60% of Sunoco's refining capacity is located in the Northeast.

The company's earnings were also bolstered by improved refining margins, which similarly trounced estimates. Dann said margins increased to $4.42 a barrel, compared with expectations of $3.78 a barrel.

Robert Campbell, Sunoco's chairman and chief executive, said in a statement the company's results were partially offset by lower margins on consumer products and other value-added businesses.

"Although results in our major refining centers were much improved, results at

Sun Lubricants

and

Sunoco Northeast Marketing

were lower, as margins in these businesses suffered from rising crude oil prices throughout much of the quarter," he said.

Crude oil prices rose throughout the quarter, peaking at a nine-year high of $34.13 a barrel in early March. This helped refiners improve margins on the wholesale level, but less so on the retail level, where prices failed to jump in tandem with crude. Oil prices have recently fallen back and were recently trading at $27.35 a barrel.

Valero, meanwhile, posted first-quarter net income of $30.7 million, or 54 cents a diluted share, compared with a loss of $2.7 million, or 5 cents a diluted share, in the year-earlier period.

A First Call/Thomson Financial survey of analysts indicated anticipated earnings of 53 cents a share.

The San Antonio-based refiner said revenues more than doubled, rising to $2.9 billion from $1.3 billion in the 1999 quarter.

The company attributed its increase in earnings to higher gasoline, distillate and petrochemical margins on the heels of the steep run-up in crude prices. Valero noted, however, the recent fall in oil prices should generate even more earnings growth.

"

OPEC's

recent agreement to increase crude oil production has led to lower oil prices, which has already resulted in improved feedstock discounts and higher petrochemical and lube oil margins," Bell Greehey, Valero's chairman and chief executive, said in a statement. "All of these factors should lead to a much improved earnings environment for the remainder of the year."

Valero was down Thursday afternoon 1 1/14, or 4%, at 30. (Valero finished down 1 1/8, or 4%, at 30 1/8.)