What Will Drive Calumet Specialty’s Stock after Its 2Q16 Results?



Analyst recommendations for CLMT

Of the analysts surveyed by Bloomberg, 73% rated Calumet Specialty Products Partners (CLMT) as a “hold” and 27% rated it as a “sell.” None of the surveyed analysts rated it as a “buy.” The consensus target price for Calumet Specialty Products Partners is $7.10. Its units currently trade near $4.50.

If the stock attains the target price within a year, it would mean a 58% price return for investors. The average target price for CLMT provided by brokers after 2Q16 results is $5.50.

The above table shows recommendations for CLMT from some of the brokers surveyed. As for Calumet’s peers, 33% rated CVR Refining (CVRR) as a “hold,” and 60% rated Alon USA Partners (ALDW) as a “hold.” Similar to CLMT, none of the surveyed analysts rated CVRR or ALDW a “buy.”

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Outlook for CLMT

Calumet is pursuing a number of cost reduction and other initiatives intended to reduce leverage and increase cash flow on a sustainable basis. The company expects the initiatives to generate an incremental $150 million to $200 million of annualized EBITDA[1. earnings before interest, tax, depreciation, and amortization] per year as compared to 2015 by the end of 2018. Plus, $60 million to $75 million of this incremental EBITDA is expected to be realized in 2016.

Tim Go, CEO of Calumet, stated, “Looking ahead to the third quarter 2016, we anticipate increased margin capture within our specialty products segment, following recent price increases. In our fuel products segment, we continue to sell gasoline, distillate and jet fuel at a premium to the Gulf Coast in our local markets, although benchmark refined product margins remain constrained by elevated domestic fuel products inventories.

“We expect our asphalt business to reach a seasonal peak in the third quarter, allowing for the conversion of existing asphalt inventory to cash ahead of the winter.”


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