How Did Tesoro’s Stock React to Its 3Q16 Earnings?



Tesoro’s stock performance

Tesoro (TSO) announced its results after the market closed on October 31, 2016. On November 1, 2016, TSO opened at $88.5 per share, just above its previous day’s close of $84.9. Tesoro saw a high of $88.8 and a low of $82.6 during the day, and it eventually closed at $83.2, around 2.1% lower than its previous day’s close but in line with its peers.

On November 1, 2016, TSO’s peers Marathon Petroleum (MPC), Delek US Holdings (DK), and Western Refining (WNR) rose 2.9%, 5.7%, and 3.1%, respectively. For exposure to refining sector stocks, investors can consider the Vanguard Energy ETF (VDE), which has ~8% exposure to the sector.

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Tesoro’s 3Q16 update

In 3Q16, Tesoro incurred capital expenditure (or capex) of $227 million, of which $42 million went to Tesoro Logistics (TLLP). For 2016, Tesoro expects to incur capex of $900 million, of which $200 million is set to go to TLLP. Tesoro incurred capex of $624 million in the first nine months of 2016.

In 3Q16, Tesoro completed a dropdown transaction with TLLP, consisting of the Alaska Storage and Terminalling Assets, for $444 million. Tesoro also closed the acquisition of Virent. For more on the acquisition, refer to Tesoro’s Acquisition of Virent Helps It Focus on Biofuels.

Tesoro expects business improvements of $400 million–$500 million in its operating income in 2016. TSO expects its refining improvements to be in the range of $200 million–$250 million, its logistics improvements to be in the range of $175 million–$200 million, and its marketing improvements to be in the range of $25 million–$50 million.

In the first nine months of 3Q16, the company’s refining and marketing improvements were above the targeted ranges, but it logistics improvement was marginally below the targeted range.


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