Sunoco, Inc. Financial Analysis Report.

📄 Words:	1354
📝 Subject:	Company Analysis
📑 Pages:	5
✍️ Type:	Essay

Income Statement
Balance Sheet
Cash Flow
References

There is currently a high demand in energy in the market, so what better way to take advantage of the situation than invest in an energy company? For this study, I chose Sunoco, Inc. Sunoco refines and markets petroleum. The company has a refining capacity of 910,000 barrels per day from five refineries and also has around 4,684 retail sites. Sunoco also manufactures petrochemicals that are used in making fibers, plastics, film and resins. The company also manufactures metallurgical-grade coke that is used by the steel industry. With headquarters in Philadelphia, Sunoco’s petroleum and petrochemicals operations are done mainly in the eastern part of the country. Its coke-making facilities are located in Virginia, Indiana, Ohio and Brazil. The company’s shares trade at the New York Stock Exchange under the symbol SUN.

The good thing about Sunoco is that it has a very comprehensive company website and it is a public company. Being a public company, its financial statements can be accessed through the website of the U.S. Securities and Exchange Commission. From the data obtained in the company’s financial statements, revenues for the year ended 2007 went up to $44.728 billion from $38.715 billion in 2006. Due to an increase in the price of crude oil, cost of revenue and operating expenses also went up $43.218 billion in 2007 compared to $37.046 billion in 2006. As result, net income for the year ended 2007 went down to $891 million from $979 million in 2006. The company’s balance sheet showed that as of Dec. 31, 2007, total assets was $12.426 billion while total liabilities was $9.893 billion resulting in a shareholders’ equity of $2.533 billion.

In terms of profitability, the company only had a profit margin of 1.9%. Return on assets for 2007 was 7.6% while return on shareholders’ equity was 38.7%. It means Sunoco, Inc. could utilize assets funded by debt to increase the income available for shareholders. For the year ended 2007, the company was illiquid with a current ratio of 0.82 and quick ratio of 0.62. Moreover, current ratio was slightly less than prior year as 0.84, and quick ratio was a little more than prior year as 0.59. Working capital to total assets ratio was at 0.37. Doing computations further showed that the company had a shareholders’ equity ratio of 0.20. The ratio of current assets to total debts was 0.63 while debt ratio was 0.59.

Accordingly, in terms of its solvency, Sunoco, Inc. had less fixed interest obligations with its somewhat low ratio. In relation to asset management, Sunoco had total assets turnover ratio of 3.82, inventory turnover ratio of 35.12, and receivables turnover of 16.65. Compared to the prior year, the company didn’t have that much difference on inventory turnover and asset turnover. However, it had lower receivables turnover ratio than prior year, 17.2, so there was a little longer average time between credit sales and cash collection. The company’s financial statement also showed that it had a free cash flow of $968,000 million. Based on this data, it is quite easy to know that Sunoco has a large maximum amount of liquid cash. Finally, Return on investment using the DuPont formula was 0.65. Therefore, compared to its prior year ROI of 0.73, Sunoco’s efficiency of the investment was diminished.

Additionally, the company’s stocks are trading at a little more above $50. This is actually a drop considering that the company’s shares traded at around $80 in the middle of 2007(see V). So, should I start investing in this company? Based on the results as well as the financial analysis made, I would say that the best judgment would be to hold buying stocks and see what happens during the first two quarters of 2008. Although initially thought of as a good investment, the findings show that the company had trouble recouping expenses due to the increase in the price of crude oil. Profit margin was in fact only 2%. The company is also likely to face more problems given that it had a negative net working capital ratio.

In regulatory filings, the company said that it intends to focus on upgrading its products instead of undergoing expansions. This is a good sign since it could help cut costs in the long run. If the company does encounter problems, it could always address liquidity issues by putting on hold its share repurchase program. The company had actually done this in 2002.

Overall, the attitude with regards to an investment with Sunoco is more of a “wait and see.” If I decide immediately to say “yes” to buying stocks now, I run the risk of losing big. If I say “no,” then there is also the chance that I might miss a good investment. The company has released good estimates for the year 2008 but with the price of crude oil continuing to go up, it would be best to see how the company deals with this problem before making a final investment decision.

Income Statement

PERIOD ENDING		31-Dec-07	31-Dec-06	31-Dec-05
Total Revenue		44,728,000	38,715,000	33,777,000
Cost of Revenue		41,598,000	35,706,000	30,616,000

Gross Profit		3,130,000	3,009,000	3,161,000

	Operating Expenses
	Research Development	–	–	–
	Selling General and Administrative	1,087,000	881,000	1,070,000
	Non Recurring	53,000	–	–
	Others	480,000	459,000	442,000

	Total Operating Expenses	–	–	–


Operating Income or Loss		1,510,000	1,669,000	1,649,000

	Income from Continuing Operations
	Total Other Income/Expenses Net	–	–	–
	Earnings Before Interest And Taxes	1,510,000	1,669,000	1,649,000
	Interest Expense	101,000	89,000	69,000
	Income Before Tax	1,409,000	1,580,000	1,580,000
	Income Tax Expense	518,000	601,000	606,000
	Minority Interest	–	–	–

	Net Income From Continuing Ops	891,000	979,000	974,000

	Non-recurring Events
	Discontinued Operations	–	–	–
	Extraordinary Items	–	–	–
	Effect Of Accounting Changes	–	–	–
	Other Items	–	–	–


Net Income		891,000	979,000	974,000
Preferred Stock And Other Adjustments		–	–	–

Net Income Applicable To Common Shares		$891,000	$979,000	$974,000

Balance Sheet

PERIOD ENDING		31-Dec-07	31-Dec-06	31-Dec-05

Assets
Current Assets
	Cash And Cash Equivalents	648,000	263,000	919,000
	Short Term Investments	–	–	–
	Net Receivables	2,840,000	2,533,000	1,969,000
	Inventory	1,150,000	1,219,000	799,000
	Other Current Assets	–	–	–

Total Current Assets		4,638,000	4,015,000	3,687,000
Long Term Investments		175,000	129,000	143,000
Property Plant and Equipment		7,039,000	6,365,000	5,658,000
Goodwill		126,000	125,000	–
Intangible Assets		158,000	176,000	–
Accumulated Amortization		–	–	–
Other Assets		190,000	172,000	12,000
Deferred Long Term Asset Charges		100,000	–	431,000

Total Assets		12,426,000	10,982,000	9,931,000

Liabilities
Current Liabilities
	Accounts Payable	5,636,000	4,473,000	4,033,000
	Short/Current Long Term Debt	4,000	282,000	177,000
	Other Current Liabilities	–	–	–

Total Current Liabilities		5,640,000	4,755,000	4,210,000
Long Term Debt		1,724,000	1,705,000	1,234,000
Other Liabilities		990,000	924,000	563,000
Deferred Long Term Liability Charges		1,100,000	905,000	1,226,000
Minority Interest		439,000	618,000	647,000
Negative Goodwill		–	–	–

Total Liabilities		9,893,000	8,907,000	7,880,000

Stockholders’ Equity
Misc Stocks Options Warrants		–	–	–
Redeemable Preferred Stock		–	–	–
Preferred Stock		–	–	–
Common Stock		281,000	281,000	280,000
Retained Earnings		5,372,000	4,622,000	3,766,000
Treasury Stock		(4,589,000)	(4,286,000)	(3,390,000)
Capital Surplus		1,662,000	1,634,000	1,587,000
Other Stockholder Equity		(193,000)	(176,000)	(192,000)

Total Stockholder Equity		2,533,000	2,075,000	2,051,000

Net Tangible Assets		$2,249,000	$1,774,000	$2,051,000

Cash Flow

PERIOD ENDING	31-Dec-07	31-Dec-06	31-Dec-05
Net Income	891,000	979,000	974,000

Operating Activities, Cash Flows Provided By or Used In
Depreciation	480,000	459,000	429,000
Adjustments To Net Income	112,000	(10,000)	107,000
Changes In Accounts Receivables	(343,000)	(537,000)	(466,000)
Changes In Liabilities	1,141,000	485,000	994,000
Changes In Inventories	76,000	(418,000)	(34,000)
Changes In Other Operating Activities	10,000	26,000	65,000

Total Cash Flow From Operating Activities	2,367,000	984,000	2,069,000

Investing Activities, Cash Flows Provided By or Used In
Capital Expenditures	(1,179,000)	(1,019,000)	(970,000)
Investments	(39,000)	–	55,000
Other Cashflows from Investing Activities	25,000	(70,000)	(120,000)

Total Cash Flows From Investing Activities	(1,193,000)	(1,089,000)	(1,035,000)

Financing Activities, Cash Flows Provided By or Used In
Dividends Paid	(220,000)	(214,000)	(169,000)
Sale Purchase of Stock	(312,000)	(909,000)	(261,000)
Net Borrowings	(259,000)	572,000	(71,000)
Other Cash Flows from Financing Activities	2,000	–	(19,000)

Total Cash Flows From Financing Activities	(789,000)	(551,000)	(520,000)
Effect Of Exchange Rate Changes	–	–	–

Change In Cash and Cash Equivalents	$385,000	($656,000)	$514,000

References

Securities Information from the SEC EDGAR^®.Database for Sophisticated Business Professionals (Sunoco Inc, 10-K, For 12/31/07 ). Web.
Sunoco Stock Price (SUN), Stock Quotes, Charts, Trades, Market News. Web.
Yahoo Finance, Sunoco, Inc.
Income Statement. Web.
Balance Sheet. Web.
Cash Flow. Web.

Income Statement

Balance Sheet

Cash Flow

References

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