Why Sunoco Logistics (SXL) Stock Is Down Today

NEW YORK (TheStreet) -- Sunoco Logistics (SXL) was falling 4.6% to $47.67 Wednesday after pricing a public offering of common units.

The oil and gas pipelines company priced the 7.7 million common units in its public offering at $48.46 per unit. The underwriters of the offering have an option to buy up to 1.155 million additional common units.

Sunoco Partners said it plans to use the net proceeds from the offering to repay the outstanding borrowings under its $1.5 billion revolving credit facility as well as for general partnership purposes.

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TheStreet Ratings team rates SUNOCO LOGISTICS PARTNERS LP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate SUNOCO LOGISTICS PARTNERS LP (SXL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 11.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has slightly increased to $346.00 million or 7.45% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -5.01%.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Oil, Gas & Consumable Fuels industry average. The net income increased by 9.1% when compared to the same quarter one year prior, going from $143.00 million to $156.00 million.
  • Compared to its closing price of one year ago, SXL's share price has jumped by 54.85%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • The current debt-to-equity ratio, 0.53, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.90 is somewhat weak and could be cause for future problems.
  • You can view the full analysis from the report here: SXL Ratings Report

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