Bank of America Downgrades Sunoco Logistics to “Neutral” (SXL)
On Tuesday, Bank of America reported that it has lowered its rating on logistics company, Sunoco Logistics Partners L.P. (SXL).
The firm has downgraded SXL from “Buy” to “Neutral,” and has reduced the company’s price target from $68 to $65. This price target suggests a 7% upside from the stock’s current price of $60.67.
In the report, the firm noted, “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 shares were down 39 cents, or 0.63%, during Tuesday morning trading. The stock is up 24% YTD.
The Bottom Line
Shares of Sunoco Logistics Partners L.P. (SXL) have a 3.77% yield, based on Tuesday morning’s price of $60.67.
Sunoco Logistics Partners L.P. (SXL) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.4 out of 5 stars.
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