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Summary

  • Refiners like Valero and Phillips 66 are delivering very good earnings results this week.
  • PBF Energy is a lesser-known name in the sector that might have provided the best earnings report so far in the sector this quarter.
  • The shares are still cheap given its growth prospects and high yield.

PBF Energy (NYSE:PBF) joined refiners Valero (NYSE:VLO) and Phillips 66 (NYSE:PSX) in delivering results that exceeding expectations this week when it provided its earnings report this morning. This little-followed refiner is a core position in my income portfolio due to its over 4% yield, and the shares are still a good value here, even if they are up nicely since I last profiled the company.

Company Overview:

PBF Energy is one of the largest independent petroleum refiners and suppliers of unbranded transportation fuels, heating oil, petrochemical feedstocks, lubricants and other petroleum products in the United States. The company owns three refineries in the Eastern part of the United States, with a combined throughput capacity of ~540,000 barrels a day.

Earnings Report Highlights and Spin-Out:

  • PBF Energy posted quarterly earnings of $1.44 a share, a whopping 50 cents a share over the consensus estimates. Last quarter, the company beat expectations on earnings by 20 cents a share.
  • Revenues came in at $4.74B, ~$210mm above consensus.
  • PBF Logistics also hit the market today. This entity is a fee-based, growth-oriented master limited partnership formed by subsidiaries of PBF Energy to own or lease, operate, develop and acquire crude oil and refined petroleum products terminals, pipelines, storage facilities and similar logistics assets. After the spin-out, PBF Energy will own just over 50% of the remaining limited partner interests in PBF Logistics and 100 percent of the general partner interest and incentive distribution rights.

Valuation and Dividend:

Before this latest earnings report, analyst consensus had PBF Energy making just over $3.30 a share in profit in FY2014, after posting just under $1.50 a share of earnings in FY2013. This consensus estimate had already moved up more than a quarter a share over the past two months for FY2014. Based on this latest quarterly report, these estimates obviously will be taken up again.

Even after today's rise, the shares are selling at 9x forward earnings and less than 10% of annual sales. The company has a solid balance sheet, and the stock has a five-year projected PEG of under 1 (.62), unusual for a high-yielder. Finally, the shares yield over four percent (4.2%), and if the company hits consensus earnings estimates, I expect the payout to go up significantly. ACCUMULATE

Source: PBF Energy: High-Yield Refiner Delivers The Goods