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How Analysts Are Rating Refiners ahead of Their Q2 Results

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Jun. 27 2019, Published 3:29 p.m. ET

Analysts’ ratings for refiners

Let’s rank six US refiners based on the number of “buy” ratings they’ve received from Wall Street analysts ahead of their second-quarter earnings results.

Marathon Petroleum (MPC) has the highest number of “buy” ratings among its peers at 94%, followed by Valero Energy (VLO) and Phillips 66 (PSX) with 84% and 72% “buy” ratings, respectively. Marathon Petroleum’s growth activities, including its acquisition of Andeavor, have taken it on a steep growth trajectory. Marathon Petroleum stock has an implied gain of 54%—the highest among its peers—based on its mean target price.

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With its growth activities and comfortable debt position, Valero is analysts’ other favorite refining stock ahead of its second-quarter earnings release. Valero’s implied gain stands at 29%. Phillips 66’s diversified yet integrated growth-oriented earnings model has made it analysts’ third-favorite pick. PSX also has a 29% implied gain.

Other stocks’ ratings

PBF Energy (PBF) has 50% “buy” ratings. Delek US Holdings (DK) and HollyFrontier (HFC) have 47% and 18% “buy” ratings, respectively. PBF’s refining earnings are likely to be affected by diminishing oil spreads in the current year. For next year, though, the company has a high growth expectation. Among its six peers, PBF has the second-highest implied gain of 42%.

Delek and HollyFrontier have lower implied gains. Delek’s financials are recovering, and its asset base is expanding. However, analysts may not like the company’s high debt burden. HollyFrontier is expected to see lower oil spreads and base oil cracks in 2019, which could affect its earnings.

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