Western Refining to Outperform

| About: Western Refining, (WNR)

Buoyed by favorable trends in the refining industry, along with the company's initiatives to improve reliability and reduce operating costs, we have upgraded independent oil refiner and marketer Western Refining Inc. (NYSE:WNR) to Outperform from Neutral.

An uptick in economic activity overseas (mainly in China and India) and prospects for higher fuel demand in the U.S. are likely to push 2011 industry margins higher than last year’s level. Against this backdrop, we expect income from Western Refining’s refining operations to improve in 2011.

Additionally, we believe Western Refining’s strategic actions – to improve its performance and competitiveness in a cost-effective manner – will drive the company’s profitable growth and boost its stock valuation.

In the near term, the company stands to benefit from exposure to the profitable Southwest refining assets. Western Refining’s strong retail and wholesale operations strengthen the positive sentiment.

As such, we believe Western Refining is well positioned going forward and view it as an attractive investment. Our long-term Outperform recommendation is supported by a Zacks #2 Rank (short-term Buy rating).

Incorporated in 2005, El Paso, Tex.-headquartered Western Refining is an independent refiner and marketer of refined petroleum products in the Southwestern and Mid-Atlantic regions of the U.S. The company operates in three segments: Refining (which accounted for 72% of the company’s total 2010 net sales), Retail (6%), and Wholesale (22%).

Western Refining competes in the Oil Refining & Marketing industry with companies like Valero Energy Corp. (NYSE:VLO), Tesoro Corp. (NYSE:TSO), Sunoco Inc. (NYSE:SUN), etc.