Goldman Sachs Just Downgraded This Petroleum Refining Play

In a report published Monday, Goldman Sachs analysts downgraded

from Buy to Neutral, with a price target of $43. US based refiners have been downgraded to Neutral following year-to-date outperformance. In the report Goldman Sachs noted, "While we continue to believe the fundamentals of the refining sector are strong – including solid demand growth, sustained crude differentials, increasing value in midstream/retail and solid FCF/capital allocation – we see the risk/reward as more balanced after YTD outperformance versus the S&P and XLE." Delek's shares have surged 43 percent year-to-date, as compared to +18 percent by the peer group, the S&P's +2 percent and XLE's +1 percent. With this, the stock has been the best performer among refiners, and there is merely 9 percent upside to the six-month price target, the analysts said. "While we recognize further upside may exist from restructuring/M&A optionality at DK: (1) risk/reward appears more balanced after share price strength and (2) we expect WTI-Midland differentials will stay compressed with new pipeline capacity additions," the analysts explained. However, the company's fundamentals are solid, with robust volume growth at the Tyler refinery, healthy retail margins in a lower crude price environment and "organic growth opportunities at its logistics business, DKL," the report added. Goldman Sachs maintained a Buy rating on

,

and

, while reiterating a Sell rating on

and

.