Sunocos Slow Quarter – US-FOREX.US
Analysts don’t expect much from Sunoco this quarter.Profit weakness plaguing all U.S. refiners stemming from gasoline overproduction, recessionary summer demand and brimming inventories has already been priced into shares. According to Citi analyst Faisel Khan, these factors have pulled the sector down roughly 30% this year. But while Khan’s expectations that the sector’s second- and third-quarter earnings will be “nothing short of abysmal” have proved correct thus far, analysts advise against fleeing the sector just yet. “Refining earnings do not remain negative for very long,” Khan said. As soon as demand returns, margin pressures will lift as excess inventory is worked off.Until then, refiners-much like nearly every other industry-are focused on cutting costs. Refining and chemicals company Sunoco
, which reports second-quarter results on Wednesday, aims to reduce costs by 300 million this year because it anticipates a challenging market for petroleum and chemical products through 2009. When the Philadelphia-based company reported first-quarter results in early May, it slashed its capital spending budget by 200 million as it deferred construction on its Middletown, Ohio cokemaking plant.Investors will be looking to see how well Sunoco has managed costs throughout the quarter and whether management sees any improvement to the company’s outlook. Analysts polled by Thomson Reuters are projecting a loss of 12 cents a share and a year-end profit of 1.69 a share.
Barclays Capital analyst Paul Cheng anticipates a refining loss of 43 million, compared to the prior quarter’s profit of 23 million and 32 million a year ago. He expects production to be down by 13% year-over-year. Sunoco shares closed Tuesday’s trading session up by 34 cents, or 1.3%, at 25.93. The stock has lost roughly 40% since the beginning of the year.