Excerpt from Barron's Weekly Magazine. Receive all our excerpts by signing up here:
Tesoro Petroleum by Vito J. Racanelli
Summary: Tesoro Corp.'s (NYSE:TSO) estimated $1 billion in cash by the end of 2008 begs the question of what to do with the stash; past missteps may cause investors to balk at a big acquisition/investment. Jacques Rousseau of Friedman Billings Ramsey says TSO should use the in a stock buyback of 20% of 67 million outstanding shares at the current $70.67/ share. TSO hasn't reduced its share-count in recent years, so such a plan would have a material impact on EPS. A similar move by Ultramar Diamond Shamrock in 2001 saw shares up 26% in 12 weeks. And volatile oil prices should allow for buybacks at prices even cheaper than present. The company wouldn't comment on Rousseau's suggestions, it said it uses excess cash to create shareholder value by raising dividends, repurchasing shares and making capital investments.
Related Links: Tesoro Hopes for Continued Operational Success, Jim Cramer's Take on TSO