Bear Of The Day: Sunoco, Inc. (SUN)

Zacks Investment Research
updated | Zacks.com

We have downgraded Sunoco, Inc. (NYSE:SUN) shares to Underperform from Neutral, reflecting the bearish refining margin outlook. Weak demand for refined products in the global downturn and increased capacity has squeezed margins throughout the industry.

Rising crude oil prices have added to Sunoco’s miseries by increasing the cost of production. With utilization rates remaining at historically low levels, we see a fairly unfavorable macro backdrop for independent refiners over the coming 6-12 months.

Sunoco’s lack of geographic diversification and refining flexibility has also become a major liability, in our view. Given these headwinds, we expect Sunoco shares to be under pressure in the near future.

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