Bank of America Downgrades Delek US Holdings

Bank of America downgraded Delek US Holdings, Inc. DK Monday from Neutral to Underperform and cut is price target from $34 to $24.

According to analysts led by Doug Leggate, “Delek’s outlook has becoming increasingly linked to the outlook for inland crude differentials – specifically in the Midland basin where a substantial widening in spreads versus WTI led strong performance earlier in the Fall.

“However, with substantial new pipeline capacity in place, incoming infrastructure likely pressuring WTI pricing at Cushing and the possibility of slowing production in the region, we believe expectations of for sustained Midland-WTI spreads have proved too optimistic. With our revised oil price assumptions our Midland-WTI spreads now stands between $2-$3; which when included in our DCF based valuation, lowers our assessed NPV to ~$24 / share.”

Leggate noted that the above “also includes the value of assumed drop downs, that we estimate is modest at ~$1-2 per share and recent weakness in DK’s publicly traded MLP interests. Our revised estimates imply downside of ~11 percent from current levels.”

Delek US Holdings, Inc. recently traded at $26.38, down 2.62 percent.