Sunoco LP (SUN)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 delivered strong consolidated performance with Adjusted EBITDA of $439M (ex transaction-related expenses: $446M), while GAAP diluted EPS was $0.75 and revenues were $5.27B .
• Versus S&P Global consensus for Q4: EPS missed (Primary EPS 1.06 vs 1.34*), revenue missed ($5.27B vs $6.18B*), but EBITDA beat ($485M vs $440M*). Bold surprise was the EBITDA beat amid lower fuel margin volatility, supported by pipeline/terminal strength *.
• SUN reaffirmed 2025 guidance: Adjusted EBITDA of $1.90–$1.95B, total operating expenses $900–$925M, growth capex ≥$400M, maintenance capex ~$150M; targeted at least 5% annual distribution growth, raising Q4 distribution to $0.8865 per unit .
• Catalysts: pipeline throughput step-up and MVC true-ups; distribution growth policy (floor of 5%); continued synergy execution; commentary that fuels demand remains resilient and tariff-driven volatility could favor SUN’s optimization strategy .

What Went Well and What Went Wrong

• What Went Well

  • Pipeline Systems: Adjusted EBITDA rose to $188M in Q4, with throughput ~1,395 kbpd; sequential uplift supported by more consistent refinery operations, seasonal Mid-Con demand, and contractual true-ups .
  • Terminals: Adjusted EBITDA reached $59M in Q4 (vs $25M prior year), driven by NuStar and Zenith European terminals; throughput ~593 kbpd .
  • Capital allocation and distributions: trailing 12-month coverage ~1.9x; quarterly distribution raised to $0.8865 and management targeted at least 5% growth in 2025 with confidence in delivering guidance .
  • Quote: “We feel just as good about [2025] guidance today… strong operational execution, expense discipline, commercial creativity and profit optimization” .

• What Went Wrong

  • Fuel Distribution margin compression and volume mix: Segment Adjusted EBITDA declined to $192M in Q4 (vs $253M in Q3), with reported margin at 10.6¢/gal (vs 12.8¢ in Q3), impacted by lower price volatility and the West Texas divestiture .
  • GAAP profitability: diluted EPS of $0.75 and revenue of $5.27B came in below S&P Global consensus; YoY revenue also declined vs Q4 2023 ($5.27B vs $5.64B) *.
  • Elevated operating expenses and interest burden with enlarged portfolio: Q4 operating expenses $172M and net interest expense $117M, reflecting scale post-acquisitions .

Financial Results

• Consolidated headline metrics

• Versus estimates (S&P Global, Q4 2024)

Values retrieved from S&P Global. EBITDA definitions may differ from SUN’s “Adjusted EBITDA”.

• Segment breakdown (Adjusted EBITDA)

• KPIs

Note: Margins and mix variability are inherent in SUN’s optimization model; Q4 Fuel Distribution was lower margin/higher volume vs Q3’s higher margin backdrop .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We feel just as good about [2025] guidance today… strong operational execution, expense discipline, commercial creativity and profit optimization” — Karl Fails .
• “NuStar [was] a home run acquisition… balance sheet goals achieved in less than 6 months… double-digit accretion within the first year” — Joseph Kim .
• “We continue to believe in the resiliency of global refined product demand… the products that we sell and distribute are going to be around for decades” — Karl Fails .
• “Higher tariffs mean higher prices… we do very well in volatile commodity environments” — Joseph Kim .
• “First-quarter 7-Eleven makeup payment… approaching approximately $30 million” — Austin Harkness .

Q&A Highlights

• Fuel Distribution: Q4 margin compression vs Q3 driven by lower volatility and West Texas sale; management emphasized long-run fuel profit optimization over quarterly margin targets .
• Capex cadence: ≥$400M growth capex is mostly optimization-focused with flexible timing and short payback relative to peers .
• Tariffs/macro: volatility viewed as an opportunity; confidence in 2025–2026 guidance despite policy uncertainty .
• Pipeline MVCs and throughput: Q4 benefited from MVC true-ups and fewer refinery downtimes; JV integration expected to unlock more value in 2025 .
• Distribution policy: shift to “at least” 5% annual growth indicates higher confidence; envisioned as multi-year quarterly increases .
• M&A: Europe/Caribbean assets show attractive stability and growth; Peerless EBITDA doubled in ~2 years; continued selective consolidation .

Estimates Context

• S&P Global consensus vs Q4 actuals: EPS missed (1.06 vs 1.34*), revenue missed ($5.27B vs $6.18B*), EBITDA beat ($485M vs $440M*) *.
• Note: SUN reports “Adjusted EBITDA” of $439M ($446M ex transaction), which may differ from S&P’s EBITDA construct; analysts should align definitions before revising models *.
• Coverage and capital allocation support estimate stability: trailing 12-month coverage of ~1.9x; leverage at 4.1x; confidence in 2025 guidance maintained .

Values retrieved from S&P Global.

Key Takeaways for Investors

• Pipeline and terminals drove the quarter; expect continued strength as JV integration and seasonal dynamics persist into 2025 .
• Fuel Distribution variability is normal; Q4’s lower margin backdrop is consistent with the optimization model, and segment results were “very good” after normalizing for West Texas .
• Distribution growth policy (≥5% for 2025) and near-term increases are underpinned by DCF coverage and leverage at target, supporting income-oriented positioning .
• Maintain a focus on EBITDA definition alignment; company-adjusted vs third-party measures can diverge materially, impacting perceived beats/misses *.
• Tariff-driven volatility and stable refined product demand are potential tailwinds for margin optimization; SUN is positioned to capitalize on both .
• Synergy execution from NuStar remains a multi-year driver (cost and commercial), with additional roll-up and optimization capex opportunities offering short paybacks .
• Near-term trading: expect attention on pipeline/terminal momentum and distribution trajectory; medium-term thesis: diversified, resilient cash flows with consolidation upside and disciplined capital deployment .