On Friday, Piper Sandler adjusted its outlook on PBF Energy (NYSE:NYSE:PBF), increasing the stock's price target from $50.00 to $61.00, while maintaining a Neutral rating.
The firm's analysis suggests that refining stocks are not as overvalued as some investors might think, and that they do not fully price in another year of high margins for 2025.
"We...view the group as still relatively inexpensive on a longer-term view," said the analysts.
The firm has updated its estimates for what it terms "mid-cycle" earnings power (EBITDA) for U.S. refiners and believes that current stock prices are largely factoring in these mid-cycle EBITDAs for the year 2025, considering the effect of ongoing share buybacks.
According to Piper Sandler, small to mid-cap refiners, specifically PBF Energy and another identified as DINO, are trading at the most significant discounts. In contrast, larger companies like PSX and VLO are seen to have the most long-term upside.
Piper Sandler's revision of the target prices across the sector reflects an anticipation of higher medium-term earnings power. However, they also note a shift towards more cautious sentiment in the market, as well as within their own outlook, due to the recent surge in stock prices and seasonal trends that typically lead to a downturn in the market.
In addition to PBF Energy, the firm has also updated price targets for other refiners, including a raise to $70 for DINO, $204 for MPC, $47 for PARR, and $187 for PSX. These adjustments are based on the firm's refreshed earnings power estimates and the current market conditions.
InvestingPro Insights
As investors consider the Piper Sandler outlook on PBF Energy and the refining sector, real-time data and InvestingPro Tips on DINO, another refiner mentioned in the analysis, could provide a broader perspective on the industry's performance and potential. DINO's management has been actively engaging in share buybacks, signaling confidence in the company's value (InvestingPro Tip #0). Additionally, with a notable shareholder yield and a consistent history of dividend payments for 37 consecutive years (InvestingPro Tips #1 and #5), DINO presents a potentially attractive investment for income-focused portfolios.
InvestingPro Data highlights that DINO is currently trading near its 52-week high, with a market capitalization of $12.4 billion and a P/E ratio of 6.73, reflecting a valuation that may interest value investors. The company's stock has experienced strong returns over the last month and three months, with respective total returns of 12.68% and 18.36%. This performance is coupled with a dividend yield of 3.18%, rewarding shareholders in the short term while they anticipate the next earnings date on May 8, 2024.
For investors looking to delve deeper into the refining sector and companies like DINO, InvestingPro offers additional insights and metrics. With a total of 13 InvestingPro Tips available, including an analysis of profitability and debt levels, investors can make more informed decisions. To access these insights and more, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.