Market Overview

Andeavor Downgraded By Morgan Stanley On Marathon Acquisition

Andeavor Downgraded By Morgan Stanley On Marathon Acquisition
Earnings Scheduled For August 6, 2018
Competing Bid Unlikely In Andeavor-Marathon Merger, Credit Suisse Says In Downgrade
Related MPC
Casey's General Stores Analysts Talk Free Cash Flow, Acquisition Potential After Q2 Beat
10 Biggest Price Target Changes For Thursday
Buckeye Partners sees South Texas Gateway export JV costing up to $500M (Seeking Alpha)

Andeavor (NYSE: ANDV) reported its first-quarter results after Monday's market close that featured a top- and bottom-line beat — but prompted Morgan Stanley to drop its bullish stance. 

The Analyst

Morgan Stanley's Benny Wong downgraded Andeavor from Overweight to Equal-weight with an unchanged $145 price target.

The Thesis

Andeavor's "modest beat" in Q1 is attributed mostly to lower D&A that was offset by Midcon and Pacific Northwest gross refining margins, which came in 14 percent below expectations, Wong said in the downgrade note. (See the analyst's track record here.)

Refining adjusting operating income came in at $105 million versus the analyst's estimates of $120 million, while marketing segment operating income of $128 million missed the $132 million Morgan Stanley expected. Logistics adjusted operating income of $188 million missed estimates of $195 million.

The downgrade of Andeavor's stock is due to Marathon Petroleum Corp (NYSE: MPC)'s acquisition offer of 1.87 Marathon shares or $152.27 in cash for each Andeavor share, Wong said. Due to a 15-percent cash cap on fully diluted shares, the deal translates to 1.59 Marathon shares and $22.84 in cash per Andeavor share; based on Monday's closing prices, this implies an offer of around $143 per share, the analyst said. 

Investors expecting a competing bid may want to revisit their thesis, as companies with sufficient resources to compete in a bidding war have no interest in doing so or would face regulatory problems, Wong said. 

Price Action

Shares of Andeavor were trading down 1.44 percent at the time of publication Tuesday. 

Related Links:

Merger Monday Makes A Return

12 Stocks To Watch For May 8, 2018

Latest Ratings for ANDV

Sep 2018CitigroupMaintainsNeutralNeutral
Aug 2018MizuhoInitiates Coverage OnNeutral
May 2018Morgan StanleyMaintainsEqual-WeightEqual-Weight

View More Analyst Ratings for ANDV
View the Latest Analyst Ratings

Posted-In: Benny Wong energyAnalyst Color News Downgrades Price Target M&A Analyst Ratings Best of Benzinga


Related Articles (MPC + ANDV)

View Comments and Join the Discussion!

Latest Ratings

CGBDJP MorganUpgrades15.5
NLYJP MorganUpgrades10.5
NTNXMorgan StanleyUpgrades58.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

William Blair Cautious On North American P&C Insurance Market, Moves To Sidelines On Sapiens International

Investor Movement Index April Summary