Deutsche Bank Initiates Coverage of Valero Energy Corporation With Buy Rating

Deutsche Bank initiated coverage of Valero Energy Corporation VLO on Wednesday with a Buy Rating and Price Target of $60.

In Wednesday’s report, analysts Ryan Todd and Igor Grinman claimed that Valero “is well positioned to benefit from what we see as three primary dynamics: increasing light-medium crude competition, growing Canadian heavy access, and product export flexibility.”

Todd saw “meaningful growth” ahead in 2015 for free cash flow generation.  On the downside, with “few clear catalysts on the horizon, and relatively less exposure than more levered midstream peers Phillips 66 PSX and Marathon Petroleum Corp. MPC, Valero likely remains less advantaged to some peers, although additional acceleration could drive upside.”

The report mentioned “targeted, accretive projects are set to pay dividends going forward, while relatively constrained forward spending levels should support a coming increase in FCF. We see a relatively attractive valuation at 3.7x 2015E EBITDA, a 23 percent discount to the group, and a 5% discount to Valero’s 10-year average multiple.”

Valero Energy Corporation recently traded at $46.41, down 0.92 percent.