Our Underperform recommendation on Sunoco (SUN)
shares takes into account the bearish refining margin
outlook. A growing supply overhang in the face of a
recession-induced fall in global oil product demand
has led to a squeeze in refiners profits.
Sunoco’s
lack of geographic diversification and refining
flexibility has also become a major liability, in our
view. Weighed down by these factors, the company
posted a second-quarter 2009 loss.
Overall, we see
a fairly unfavorable macro backdrop for independent
refiners like Sunoco. We believe this will cause
its shares to underperform relative to the
market as well as the sector in the coming quarters.Zacks Investment Research