Market Overview

Oppenheimer Issues Massive Upgrade To Refining Sector

Share:
Oppenheimer Issues Massive Upgrade To Refining Sector
Related MPC
Earnings Scheduled For July 27, 2017
India Keeps Key Rates Unchanged: ETFs in Focus
Bowling Portfolio Management LLC Buys Boeing Co, Anthem Inc, Hasbro Inc, Sells Merck Inc, CBS ... (GuruFocus)
Related PSX
Bear Market Grips Crude Stocks as U.S. Production Grows
Bear Market Grips Crude Stocks as U.S. Production Grows
Public Employees Retirement Association Of Colorado Buys Treehouse Foods Inc, American Tower ... (GuruFocus)

Analysts at Oppenheimer said in a new research note that the more than five year outperformance of refining stocks will continue.

The analysts upgraded HollyFrontier Corp (NYSE: HFC), Marathon Petroleum Corp (NYSE: MPC), Phillips 66 (NYSE: PSX) and Tesoro Corporation (NYSE: TSO) to Outperform, while also reiterating Valero Energy Corporation (NYSE: VLO) at an Outperform.

Underscoring the upgrade and bullish outlook were "favorable" fundamentals, including a wide crude differential, low natural gas prices, and growing refined product exports.

Oppenheimer also said that refining "valuations remain attractive," even given "strong stock performance since 2010." With these companies buying back shares, reducing debt, and growing dividends, the analysts argued that those valuations could extend further.

In the note, the analysts forecast a Brent-WTI differential that would fluctuate between $4 and $8, calling that a "huge competitive advantage to US refiners with processing flexibility." Also benefiting refiners is the low cost of natural gas, which is used as an input in many refining operations. So long as prices remain below $4/mcf, Oppenheimer said that this tailwind will persist.

Those two factors, according to the analysts, combined to form a major macro trend behind the shift that enabled the US to become the world's largest exporter of refined products.

This year, Valero and Tesoro have performed the best among these names, gaining roughly 20 percent. Marathon, Phillips and HollyFrontier have all gained more than 10 percent as well. This compares to a 2.2 percent increase in the S&P 500.

Latest Ratings for MPC

DateFirmActionFromTo
May 2017PiperJaffrayReinstatesOverweight
Feb 2017UBSUpgradesNeutralBuy
Dec 2016JP MorganUpgradesNeutralOverweight

View More Analyst Ratings for MPC
View the Latest Analyst Ratings

Posted-In: hollyfrontier marathon petroleum OppenheimerAnalyst Color Upgrades Commodities Markets Analyst Ratings Best of Benzinga

 

Related Articles (HFC + MPC)

View Comments and Join the Discussion!