Citigroup picks winners and losers among U.S. refiners


More on Citigroup's take on oil refiners: The firm expects to see a bottoming of earnings in Q4 for most names, but companies overweight the Midcontinent and/or Midwest could experience a difficult earnings environment through Q1 2014.

The diverging earnings performance will result in positive price appreciation for some refiners - such as Valero (VLO) and Tesoro (TSO), which earn upgrades to Buy - but underperformance for others, such as on Alon USA (ALDW), CVR Refining (CVRR), Holly Frontier (HFC) and PBF Energy (PBF), which will remain pressured by narrowing price differences between WTI and Brent crude.

TSO will benefit next year from a tighter gasoline market in California, and VLO will benefit from wider heavy-light differentials in H2 2014 as increased Canadian heavy crude flows to the U.S. Gulf coast, Citi says (earlier: I, II).

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Comments (6)
  • Qniform
    , contributor
    Comments (4567) | Send Message
     
    Really good call, Citi. The underperformers picked sit at or near their 52 week lows.
    2 Oct 2013, 05:40 PM Reply Like
  • jrp1324
    , contributor
    Comments (108) | Send Message
     
    I am taking a small position in ALDW. Citi is correct that this one will probably not turn around until after 1st Q 2014. I have a much longer time horizon and can add to position if my timing is terrible.
    2 Oct 2013, 08:32 PM Reply Like
  • Continental Kid
    , contributor
    Comments (239) | Send Message
     
    they have beat the life out of the refiners for months.....down to where they have now probably accumulated a good stake....and here come the upgrades....lol...been long VLO and PSX for a long time....the cash flows are huge and there is safety in size.....was encourage by PSX increasing it dividend ...as both companies payout ratio is very low...so future dividend hikes and buybacks are a strong possibility...best of luck to all
    2 Oct 2013, 09:43 PM Reply Like
  • drking
    , contributor
    Comments (268) | Send Message
     
    Good call Citigroup you have beat up these stocks for a long time now. Why is it any company that pays a good dividend the analysts run it down ???????? they all seem to have 20/20 hindsight

     

    I have made a lot of money thanks to these people
    3 Oct 2013, 03:37 AM Reply Like
  • RASTA
    , contributor
    Comments (59) | Send Message
     
    So the mid -cons "sitting"
    on oil and low cost nat gas for powering their plants won't make money hand over fist!Rasta
    3 Oct 2013, 07:14 AM Reply Like
  • koolsool
    , contributor
    Comments (496) | Send Message
     
    Buy the downgrade. Sell the upgrade. That is probably what Citi is doing.
    3 Oct 2013, 09:53 AM Reply Like
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