Hook & thesis:
Sunoco L.P. is set up for a run at new all-time highs. The stock is trading near $62.15 after a string of constructive company updates and guidance that imply mid-single-digit distribution growth and meaningful adjusted EBITDA in 2026. With a dividend yield north of 5.8%, free cash flow of $373 million and an EV/EBITDA near 11, the risk/reward favors disciplined buyers who are willing to accept a modest stop.
The trade here is straightforward: long Sunoco with an entry at $62.00, stop loss at $58.00, and a primary target of $70.00 over a long-term horizon (180 trading days). That target implies roughly 13% upside from the entry while capping downside near 6.5% - an attractive ~2:1 reward-to-risk for a stock with visible distribution coverage and improving operational momentum.
What Sunoco does and why it matters
Sunoco is a downstream fuel distributor and infrastructure owner. Its business spans Fuel Distribution, Pipeline Systems and Terminals, including roughly 6,000 miles of refined product pipeline and 56 product terminals. The operating model delivers predictable cash flow from distribution services and terminals while pipeline assets provide structural scale advantages in midstream logistics.
Investors should care because Sunoco combines an income profile with exposure to refining and distribution volumes. Management’s explicit target of at least 5% distribution growth, coupled with guidance for adjusted EBITDA in the $3.1-$3.3 billion range for 2026, gives the market both a yield story and an earnings-growth narrative - an uncommon mix that can compress multiple and drive price appreciation when macro and fuel spreads cooperate.
Key financial and market context
| Metric | Value |
|---|---|
| Current price | $62.15 |
| 52-week high | $62.42 (02/18/2026) |
| Market cap (snapshot) | $9.81B |
| P/E (trailing) | ~26.9 |
| EV/EBITDA | ~11.1 |
| Free cash flow | $373M |
| Dividend yield | ~5.9% |
| Debt / Equity | ~1.71 |
Why the numbers support a buy here
There are three concrete reasons to consider a long position now:
- Guidance and cash flow. Management is calling for adjusted EBITDA of $3.1-$3.3 billion for 2026 and expects at least 5% distribution growth. Combined with reported free cash flow of $373 million, that suggests distribution coverage and capital investment can coexist without forcing aggressive leverage expansion.
- Valuation is reasonable for the sector. EV/EBITDA sits around 11.1 and P/E is in the mid-20s. For a cash-generative downstream operator with stable fee-based terminal and pipeline income, those multiples leave room for multiple expansion if growth targets are met and distribution visibility improves.
- Technical momentum and market positioning. The 10-day SMA is ~$59.53 and the 50-day SMA is ~$55.99, both below the current price, while the 9-day EMA ($60.04) and MACD readings show bullish momentum. A string of higher moving averages plus a fresh push above the 52-week high would attract momentum flows and possibly force short-covering: recent short interest and short-volume prints show meaningful activity that could amplify a breakout.
Trade plan - exact rules
- Entry: Buy at $62.00.
- Stop loss: $58.00 (technical invalidation below the 50-day EMA and a clear lower trend).
- Target: $70.00 (primary) to be reached over the next long term (180 trading days).
Horizon rationale: I expect the path to a new all-time high to play out over the next 180 trading days. That timeframe accounts for the cadence of macro-driven fuel spreads, rolling seasonal demand, and the time needed for distribution announcements and continued execution to re-rate the multiple. Short-term catalysts can accelerate this, but a 180-trading-day window provides room for volatility while protecting downside with a hard stop.
Reward-to-risk: Entry $62.00 to target $70.00 is ~13.0% upside. Entry to stop $58.00 is ~6.5% downside. That gives roughly a 2:1 reward-to-risk, acceptable for an income-oriented midstream/distribution name where upside is driven by multiple expansion and modest earnings growth.
Catalysts to watch (2-5):
- Quarterly results and management commentary confirming or bettering the $3.1-$3.3B adjusted EBITDA target.
- Distribution raise or clearer multi-year distribution growth cadence; management has stated a minimum 5% target.
- Operational news that increases throughput or margin at terminals/pipelines, or favorable refiners' crack spreads that lift fuel distribution economics.
- Visibility from partnerships or marketing wins (e.g., motorsports sponsorships and brand deals) that support retail fuel volume recovery.
Risks and counterarguments
Every trade has a realistic bear case. Here are the principal risks that could derail this thesis:
- Commodity and crack-spread compression. Fuel distribution margins are sensitive to refining spreads and retail fuel pricing dynamics. A sustained weakening in crack spreads can compress cash flow, making distribution growth harder to sustain.
- Leverage and refinancing risk. Debt-to-equity is meaningfully elevated (~1.71). If macro rates rise or credit markets tighten, Sunoco could face higher interest costs or refinancing pressure, which would weigh on valuation and distribution coverage.
- Cyclical demand swings. Transport and seasonal demand fluctuations can reduce throughput and hit adjusted EBITDA. A weaker demand environment would slow multiple expansion and could trigger distribution caution.
- Execution risk on capital projects. The company plans >$600M in growth capex; overruns or delayed projects would delay accretive earnings and cash flow improvements.
- Overbought technicals and profit-taking. RSI is elevated (~72), which raises the chance of near-term mean reversion. Buyers should respect the stop and manage position size accordingly.
Counterargument: One reasonable bearish view is that Sunoco is a mature, cyclical fuel distributor whose long-term upside is limited absent transformational M&A or structural tightening in crude/refined product supply. The mid-20s P/E and ~11x EV/EBITDA already price in steady outperformance; if fuel margins normalize or distribution raises stall, the stock could revert to a lower multiple.
How I would be proven wrong and what would change my mind
I would reassess the long upgrade if any of the following occur:
- Management revises 2026 adjusted EBITDA materially lower than the $3.1-$3.3B range or delays the 5% distribution growth target.
- Debt metrics deteriorate meaningfully - for example, leverage rising with free cash flow declines or a credit rating action that increases funding costs.
- A clear structural decline in retail fuel volumes or terminal throughput that reduces fee-based revenue visibility.
Execution checklist for traders
- Position size: Limit exposure so a stop hit at $58 results in a controlled portfolio loss (determine size based on personal risk tolerance).
- Use the $58 stop; if price breaks and holds below the 50-day EMA (~$56.85), re-evaluate before adding back.
- Take partial profits on a first move to $66 and raise the stop to breakeven if momentum remains constructive.
Bottom line
Sunoco combines a sizable dividend, visible free cash flow and a pragmatic guidance framework that can push the stock past its prior high if execution and fuel economics cooperate. With a clear entry at $62.00, a conservative stop at $58.00, and a $70.00 target over the next 180 trading days, the trade offers a defined risk with a compelling upside path tied to distribution growth and multiple expansion. The thesis is not without risks - commodity swings, leverage and execution - but for disciplined traders who respect the stop, Sunoco looks like a constructive long.
Key monitoring points going forward: adjusted EBITDA trajectory, distribution announcements, free cash flow trends, leverage changes, and the rolling technicals around the 50-day EMA.