CVR Refining’s Yield Is Higher than Peer Average

As we learned in the previous article, CVR Refining (CVRR) trades at a forward distribution yield of ~18%. This is higher than the average 4.5% yield of its peers Alon USA Partners (ALDW), Northern Tier Energy (NTI), and Calumet Specialty Products Partners (CLMT). CLMT’s forward yield indicates that analysts don’t expect it to pay distributions in the next year.

The forward distribution yield of a company is calculated by dividing its estimated one-year future distribution per unit by its market price per unit.

The graph above compares the forward yields of CVRR and its peers relative to their expected distribution growths. As the graph shows, analysts expect the two-year compounded distribution growth for all the four refining MLPs to be negative. CVRR is expected to have the highest drop in its distributions over the next two years.

CVR Refining is trading at a trailing-12-month EV/EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of 4.2x. In comparison, Alon USA Partners (ALDW), Northern Tier Energy (NTI), and Calumet Specialty Products Partners (CLMT) are trading at EV/EBITDA multiples of 3.8x, 7.2x, and 10.2x, respectively. So, CVRR’s EV/EBITDA multiple is lower than average for selected peers.

As for forward multiples, CVRR trades at a forward EV/EBITDA of 5.9x. ALDW, NTI, and CLMT trade at forward EV/EBITDA ratios of 6.7x, 10.8x, and 9.2x, respectively. The higher forward ratios of ALDW, NTI, and CVRR indicate expectations of negative EBITDA growth for all these companies in 2016.

Next, we’ll take a look at the recent changes in institutional investors’ holdings in CVR Refining.