24 Sep

Which Refiner Has the Highest Implied Gain?

WRITTEN BY Michelle Rey

Refining stocks implied gains

In this series, we’ll rank refining stocks based on their implied gains. We’ll consider Wall Street analysts’ mean target prices to estimate these stock’s implied gains. We’ll also look at refiners’ expected earnings growth, forward PE, and dividend yields in 2018.

Which Refiner Has the Highest Implied Gain?

If we rank refiners in terms of their implied gains, Delek US Holdings (DK) occupies the top spot, followed by Marathon Petroleum (MPC) and Valero Energy (VLO). These top three stocks have implied gains of over 20%.

The next three stocks, namely Phillips 66 (PSX), PBF Energy (PBF), and HollyFrontier (HFC), have implied gains of between 10% and 20%. Andeavor (ANDV) stands in last with an implied gain of below 10%.

Earnings growth, valuation, and dividend yield

If we review the above stocks based on expected earnings growth in 2018, DK is expected to post the highest growth in earnings. HFC and PBF also have high growth rates. These three companies’ earnings are expected to grow by more than 100% in 2018.

In terms of valuation, DK and HFC are trading below the peer average of 10.8x. However, other stocks are trading above the average.

Moreover, VLO, PSX, and PBF have above-average dividend yields. The average dividend yield of refining stocks stands at 2.4%.

Overall…

DK has the highest implied gains, the highest growth estimates for 2018, and below-average valuations. VLO and PSX also have high implied gains with above-average dividend yields.

HFC has a high growth rate and below-average valuations, but its implied gains are relatively low.

We’ll discuss more about the above parameters from the next article onward, starting with DK.

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