Why PBF Energy Is JPMorgan's Top Refining Pick...

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J.P. Morgan’s Phil Gresh believes that there could be robust upside for PBF Energy Inc PBF, associated with asset integration and execution, following the completions of the Chalmette and Torrance acquisitions.

The analyst initiated coverage of the company with an Overweight rating and price target of $40. Gresh also named the stock as J.P. Morgan’s Top Refining Pick.

“PBF checks all of the boxes we look for around valuation on both sum-of-the-parts and sustaining FCF yield. Further, it has flexible pro forma balance sheet metrics that leave room for additional opportunities,” the analyst mentioned.

Well Diversified

Following its recent acquisitions, PBF Energy has been able to diversify its pro forma refining geographical mix well, “with a favorable crude slate skewed to medium/heavy barrels,” according to the J.P. Morgan report.

The company also owns a 54 percent LP stake in its midstream subsidiary, PBF Logistics LP PBFX, which is expected to generate pro forma EBITDA of $145 million in 2017, with $250 million of droppable logistics EBITDA droppable at the PBF Energy level.

Return Potential

In addition, Gresh pointed out that the company has been able to sustain a “relatively attractive” free cash flow yield and balance sheet.

The analyst believes that the stock has a total return potential of about 25 percent, as compared to the group average of about 15 percent.

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Posted In: Analyst ColorLong IdeasInitiationAnalyst RatingsTrading IdeasJ.P. MorganPhil Gresh
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