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Why Half of Surveyed Analysts Rate CVR Refining a ‘Hold’

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Year-to-date returns

CVR Refining (CVRR) has generated total returns, including dividends, of -55% so far in 2016. In comparison, Alon USA Partners (ALDW) and Calumet Specialty Products Partners (CLMT) have generated total returns of -55% and -73%, respectively, during the same timeframe. The Energy Select Sector SPDR ETF (XLE) has generated 11.3% returns in 2016.

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Analyst recommendations

The above graph compares CVRR’s total returns with those of ALDW, CLMT, Northern Tier Energy (NTI), XLE, and the Alerian MLP Index (AMZ).

Analysts’ median target price for CVRR for the next year is $10.3. The low and high target prices for the stock over the same period are $7 and $15, respectively. The median target price implies a 21% price return over the next year from CVRR’s current price of $8.48.

About 12.5% of the analysts surveyed have rated CVR Refining a “buy” while 50% have rated it a “hold.” 37.5% of the surveyed analysts have rated CVRR a “sell.” As for other refining MLPs, none of the surveyed analysts have rated ALDW, CLMT, or NTI a “buy.”

Weak crack spreads

“Our first quarter 2016 results were impacted by the downtime associated with the final phase of the Coffeyville refinery turnaround as well as weak crack spreads,” said Jack Lipinski, chief executive officer of CVRR in the company’s 1Q16 earnings release. He continued, “With the successful completion of the Coffeyville turnaround behind us, we are in position to take advantage of the increased demand for transportation fuels that typically occurs during the late spring and summer months.”

As the recommendations for CVRR suggest, analysts expect increased throughput at Coffeyville and increased demand for transportation fuels to reflect in CVRR’s stock price in the short term. However, CVRR may not enjoy crack spreads at 2015 levels in the near future.

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