Wachovia Upgrades Sunoco Logistics Partners (SXL) to Outperform

July 24, 2008 8:51 AM EDT

Wachovia upgrades Sunoco Logistics Partners (NYSE: SXL) from Market Perform to Outperform with a $54 to $58 valuation range.

The upgrade is due to strong Q2 results and a step change in the partnership’s sustainable base of earnings.

The firm said, "With the addition of several pipeline and storage assets to the Western Pipeline System and Nederland Terminal, management believes that the strong H1'08 results are sustainable going forward, implying increased visibility for distribution growth, in our view. For 2009, SXL is projecting 10+% distribution growth. We’re forecasting distribution growth of 10.7% in 2008 and a five-year CAGR of 6.9%. We believe SXL is well positioned in a turbulent market environment given its investment grade credit rating, predominantly fee-based cash flows, and strong balance sheet."

According to Wachovia, SXL appears attractively priced, yielding 8.1% and trading at 2008E and 2009E P/DCF multiples of 8.5x and 8.8x. By comparison, the midstream peer group medians are 8.1%, 9.7x and 8.7x.

Sunoco Logistics Partners L.P. (the Partnership) is principally engaged in the transport, terminalling and storage of refined products and crude oil, and the purchase and sale of crude oil in 12 states located in the Northeast, Midwest and Southwest United States.

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