"[W]e see limited upside, especially if/when refining margins rebound and offer greater valuation growth potential to its large-cap peers (Tesoro Corporation TSO, Valero Energy Corporation VLO, Marathon Petroleum Corp MPC that are currently trading at steeper discounts," analyst Paul Cheng wrote in a note.
That said, Cheng noted the company's well-diversified business should be able to stand cyclical volatility better than other pure-play refiners.
Additionally, Cheng also downgraded Delek US Holdings, Inc. DK to Equal Weight from Overweight, while upgrading Alon USA Energy, Inc. ALJ to Equal Weight from Underweight.
Chen downgraded Delek on valuation and its continuously challenged margin capture at both refineries, neither of which show visibility toward material improvement. The analyst also slashed the price target to $15 from $20.
That being said, the analyst noted the possibilities of dropping retail assets into DKL and/or purchasing the remainder of Alon, which may present medium-term positive catalysts for the stock.
Meanwhile, the analyst has upgraded Alon USA after the company has significantly underperformed since the end of 2012. However, he cut the price target to $8 from $10.
"Although we continue to believe ALJ's refining assets are subpar compared with other larger cap refiners, the shares' poor performance has now fairly reflected the poor asset quality, in our view. We no longer believe it will underperform the sector, given its already depressed valuation," Chen highlighted.
At Time Of Writing...
- Phillips 66 shares were down 0.2 at $76.25.
- Delek shares were down 3.78 percent at $12.74.
- Alon shares were down 0.46 percent at $6.52.
Did you like this article? Could it have been improved? Please email feedback@benzinga.com to let us know!
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
date | ticker | name | Price Target | Upside/Downside | Recommendation | Firm |
---|
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.