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Why Andeavor Has so Many ‘Buy’ Ratings among US Refiners

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Dec. 4 2020, Updated 10:52 a.m. ET

Analyst ratings for Andeavor

In the previous part, we saw why Marathon Petroleum (MPC) has the highest number of “buy” ratings among the seven American refining stocks we’re discussing in this series. Now, we’ll take a look at the analyst ratings for Andeavor (ANDV)— the analysts’ second-best pick.

The analyst rating graph below shows that 15 (88%) of the 17 analysts covering Andeavor (ANDV) have rated the stock a “buy” so far in August 2017. Two analysts have rated ANDV a “hold.”

Andeavor’s analyst ratings have improved in August 2017 over August 2016. After its 2Q17 earnings, Morgan Stanley raised ANDV’s mean target price from $110 per share to $112 per share.

ANDV’s mean price target of $111 per share implies a ~18% gain from its current price level.

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Why so many “buy” ratings for ANDV?

Andeavor is galloping along a growth path with acquisitions, including the recent Western Refining (WNR) acquisition. Andeavor continues to integrate WNR and achieved $80 million in annual run-rate synergies by August 8, 2017. The company expects annual synergies of ~$350 million–$425 million from the integration of WNR by June 2019. Overall, Andeavor expects operational improvements of $475 million–$575 million in 2017.

Andeavor has continued its growth activities in its Refining, Logistics, and Marketing segments. In refining, Andeavor has begun construction for its Los Angeles Refinery Integration and Compliance Project, which is expected to deliver $125 million in annual EBITDA (earnings before interest, tax, depreciation, and amortization), with an expense of around $510 million. The project is supposed to be completed in 2019.

In July 2017, Andeavor received a permit for its Isomerization project at the Anacortes refinery. The project is estimated to cost $170 million and will likely to deliver $40 million of annual EBITDA. The project is likely to be operational in 2Q18.

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Logistics projects

In its Logistics segment, Andeavor reached an agreement for the terminaling and transportation services with Petróleos Mexicanos in Mexico in July. This will allow the company to supply 30–40 Mpd (thousand barrels per day) of transportation fuels in Mexico.

Andeavor also announced its intention to proceed with its Conan Crude Oil Gathering Pipeline system because the company received enough third-party commitments to go forward. The project will be operational by mid-2018, with a total investment of $225 million.

Marketing projects

In its Marketing segment, Andeavor acquired 39 stores in July, growing its retail network in northern California.

Andeavor is thus likely to witness better earnings in 2017, with growth activities in place and an improving refining environment. It may be this expectation of higher earnings that is building the “buy” ratings among analysts.

Continue to the next part for a closer look at Valero Energy (VLO).

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