SEPTEMBER 6, 2006



Word on the Street


Citigroup Cuts Sunoco, Valero Energy to Hold

Analyst Doug Leggate says the downgrades reflect ongoing margin weakness and his view that second-half earnings per share may fall below consensus forecasts


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From Standard & Poor's Equity Research
Citigroup downgraded Sunoco (SUN) and Valero Energy (VLO) to hold from buy.


Analyst Doug Leggate says the downgrades reflect ongoing margin weakness and his view that second-half earnings per share may fall below consensus forecasts. While there's normally a fall in refining margins after the summer driving season, he thinks the decline this year could be exacerbated by a shift back to winter grade gasoline, which could alleviate much of the blending difficulties that supported margins during much of 2006. Leggate also notes that U.S. product inventory levels have recovered from recent lows.

The analyst cuts his 2006 earnings per share estimate for Valero from $9.05 to $8.83, and his $79 price target to $65. He also trimmed his Sunoco 2006 EPS forecast from $8.15 to $7.75, and $90 target to $81.


All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is or will be, directly or indirectly related to the specific recommendations or views expressed in this research report.
Standard & Poor's Regulatory Disclosure

Any advice, analysis, or recommendations contained in articles labeled "Insight from Standard & Poor's" reflect the views of Standard & Poor's, which operates separately from and independently of BusinessWeek Online. It is possible that BWOL may from time to time publish information that is not consistent with advice, analysis, or recommendations that are published by Standard & Poor's. Standard & Poor's and BusinessWeek Online are each units of The McGraw-Hill Companies, Inc.
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