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Why Are Wall Street Analysts Divided on PBF Energy?

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Jun. 27 2019, Updated 4:29 p.m. ET

Analysts’ ratings for PBF

Let’s look at Wall Street analysts’ fourth-favorite refiner, PBF Energy (PBF), which has 50% “buy” ratings. Peers Marathon Petroleum (MPC), Valero Energy (VLO), and Phillips 66 (PSX) have 94%, 84%, and 72% “buy” ratings, respectively.

Analysts’ ratings on PBF seem to be divided, with eight (or 50%) out of 16 analysts calling it a “buy” in June. Another six analysts have rated PBF as a “hold,” and the remaining two have rated the stock as a “sell.”

Wall Street’s recent actions are also divided on the stock. While Cowen and Company has raised its target price on PBF from $33 to $34, Citigroup has cut its target price on the stock from $32 to $30. PBF’s mean target price of $39 implies a potential upside of 42% from its current price.

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Why are analysts’ opinions on PBF divided?

In 2019, analysts expect PBF’s earnings to fall the most among its peers. The company’s earnings could fall 53% to $1.5 per share in 2019, likely due to weaker oil spread expectations. The narrowing light-heavy crude oil spread is a challenging area for it. In the second quarter, PBF’s EPS are expected to fall 22% year-over-year. The company also has a weak financial position due to the high debt on its balance sheet and its tighter cash flow position.

However, the company has been expanding via capex, and its high-complexity refineries are well placed to take advantage of the upcoming IMO (International Maritime Organization) regulations. Starting on January 1, 2020, the IMO will restrict sulfur content in marine fuel to 0.5%. Analysts expect PBF’s earnings to rise to $4.9 per share next year, a jump of 219%—the highest among its peers.

While PBF’s 2019 earnings outlook is dull, its earnings prospects for 2020 look bright. It’s no surprise that analysts are divided on its stock.

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