Is Sunoco Worth Buying for Growth Despite Debt and Refinery Risk?

Sunoco LP SUN is pairing a larger operating footprint with rising cash distributions and a valuation below several benchmarks. Those factors give investors a credible growth-and-income case.

The trade-off is equally visible. Debt remains high, the Burnaby Refinery adds earnings volatility and a larger international footprint creates tax, currency and integration friction. The decision hinges on whether cash-generation potential and distribution growth provide enough compensation for those risks

Sunoco's Valuation Offers a Discounted Entry Point

SUN trades at a forward 12-month price-to-earnings ratio of 7.64, below 13.98 for the Zacks sub-industry, 12.2 for the sector and its five-year median of 8.68. Those comparisons strengthen the value case without assuming the discount will close.

Global Partners LP GLP combines fuel distribution, retail locations and terminal infrastructure, offering a nearby operating comparison. CrossAmerica Partners LP CAPL is a U.S. wholesale motor-fuel distributor that also operates convenience stores and owns or leases fuel-site real estate. Both provide useful reference points when weighing SUN's discount against its risk profile.

Sunoco's Distribution Growth Supports the Income Case

Sunoco's quarterly distribution reached $1.0023 per unit, up 1.25% sequentially and more than 10% year over year. That marked the seventh consecutive quarterly increase, while trailing 12-month coverage improved to 2.1 times.

Management remains on pace for 10% distribution growth in 2026 and continues to target at least 5% annual growth over multiple years. The combination of payout growth and improved coverage supports the income case, though future increases still depend on cash generation and capital allocation.

Image Source: Sunoco

SUN's Broader Asset Base Improves Cash Flow Visibility

Fuel Distribution remains Sunoco's core earnings engine, while Pipeline Systems and Terminals add fee-based income across a broader geographic footprint. Management expects these infrastructure assets to continue providing reliable and stable income as the portfolio expands.

Contractually committed revenue totaled $1.42 billion at June 30, 2026, largely tied to fixed-price and fixed-volume obligations. That does not eliminate operating risk, but it gives part of the expanded infrastructure portfolio greater revenue visibility.

SUN's Debt and Refinery Risks Keep the Trade-Off Real

Long-term debt remained about $13.3 billion at June 30, while second-quarter interest expense climbed to $204 million from $123 million a year earlier. Net leverage of about 3.7 times was below management's 4.0-times long-term target, but absolute debt service remains substantial.

The Burnaby Refinery adds direct exposure to refining margins, crack spreads and operating reliability. Its contribution can rise when refining economics improve, but maintenance downtime or weaker margins can reduce portfolio earnings, leaving a more cyclical element inside Sunoco's diversified base.

Sunoco's Earnings Conversion Adds Another Watchpoint

Sunoco recorded a $114 million foreign-currency exchange loss in the first half of 2026, while second-quarter income tax expense rose to $79 million from $7 million a year earlier. Those items show how international expansion can add friction between operating growth and reported earnings.

Second-quarter revenues beat the Zacks Consensus Estimate by 40.5%, while earnings missed the consensus mark by 64.9%. The split underscores that a larger revenue base does not always translate cleanly into per-unit earnings.

SUN's Style Scores Reinforce the Near-Term Setup

SUN's discounted valuation, rising distribution and broader asset base support the growth-and-income case, but the trade-off remains real. Debt service, refinery volatility and earnings-conversion risk can offset gains from scale, making the investor decision dependent on tolerance for those uncertainties.

SUN currently carries a Zacks Rank #2 (Buy), with a Value Score of A, Growth Score of A, Momentum Score of B and VGM Score of A. Because the Zacks Rank and Zacks Style Scores are designed to complement one another over a one- to three-month horizon, the combination supports the near-term setup without removing the longer-term leverage, refinery and integration risks. You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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