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Gold/Mining/Energy : Sunoco - SUN - The Best Oil Company -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (26)	2/8/2008 8:32:23 AM
From: Dennis Roth	Read Replies (1) \| Respond to of 29

Sunoco, Inc. (SUN): Maintain Buy following 4Q2007 results; shares very inexpensive - Goldman Sachs - February 08, 2008 What's changed Sunoco reported adjusted 4Q2007 EPS of $0.20 (including a $0.12 negative impact due to the phase out of renewable tax credits), below the First Call consensus estimate of $0.39 and our $0.55 estimate. Lower refining earnings accounted for approximately $0.15 of the EPS variance versus our estimate, driven primarily by higher operating costs than we had been forecasting. In addition to the tax credit impact, the remainder of the variance versus our estimate was driven by small shortfalls in marketing and chemicals earnings. We are lowering our 2008-2012 EPS estimates due to the announced maintenance activity in 1Q2008, slightly higher operating costs and a lower near-term capture rate, which we assume rebounds to more normal levels over the course of the year. Implications We maintain our Buy rating on Sunoco and continue to see significant upside to its shares driven by both a rebound in refining margins over the next 3-6 months as well as the potential restructuring of its non-refining businesses. Regarding the latter, we are encouraged by what we see as management laying the groundwork for better value recognition of these businesses, further supported by the mention in its 4Q2007 earnings release that it continues to “evaluate portfolio options.” We continue to believe that additional clarity on the best corporate structure for its coal and coke business as well as strategic action in chemicals represent key catalysts for Sunoco shares. Valuation We currently see 52% upside potential to our unchanged $90 12-month target price, which is based on asset value, P/E and cash flow valuation analyses. Key risks Key risk is sustained lower commodity prices.