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Time to get defensive on refiner shares, Raymond James says

  • Bullish sentiment on U.S. refining has become increasingly consensus, but the reality is that refiner shares have caught up to near-term expectations, Raymond James says.
  • Aside from general seasonality, the firm says it’s tough to paint a bullish picture for gasoline/diesel cracks amid the continued upward creep in global refining capacity; also, valuations are sitting near the top end of the historical range after the recent run-up in the sector.
  • The firm sees little in the way of near-term catalysts to drive the next leg up in refining stocks during the historically weaker summer months.
  • As a result, the firm cuts its ratings for Valero Energy (VLO -0.1%) to Outperform from Strong Buy, and Holly Frontier (HFC -1.3%), Delek US (DK -4.3%) and PBF Energy (PBF -0.8%) to Market Perform from Outperform; only “defensive, insulated” Phillips 66 (PSX -0.3%) gets an upgrade, to Outperform from Market Perform.
Comments (4)
  • Michael Fitzsimmons
    , contributor
    Comments (8085) | Send Message
     
    And yet PSX is raised to Outperform. "Defensive and insulated" describes PSX perfectly. As I have been saying for some time now, PSX is quite possibly the best play on "Shale-USA" for reasons I list here:

     

    http://bit.ly/1dSHWkk
    23 Jan, 04:01 PM Reply Like
  • TFCAB
    , contributor
    Comments (1941) | Send Message
     
    Agree on PSX. and i loved the article.

     

    RJF is a good house and usually does good work, but in this case i disagree.

     

    While RJF was writing up their down grades VLO was issuing Q4 guidance and projects Q4 EPS between 1.60 -1.80 vs 93c consensus. Additionally, today on the heels from this interim report the amateurs sold off VLO and it was down over $1.00 at one point......the pro's stepped in and bought it all afternoon and it closed up 30cents. Amateurs open, pro's close.
    IMO refiners have tail winds right now.......altho WTI / Brent spread has narrowed over last couple of days, its been consistently in the $12-16 range. plenty of spread there for refiners to make good margins and profitability.

     

    WTI has a better chance of seeing $80 this year than $105.....dont think this $95 mark is gonna hold for long. No Way the Saudis let Brent drop to under $100.

     

    I expect the sector to report strong earnings here in a couple of weeks.

     

    i am long most of the major refiners including VLO and PSX
    23 Jan, 04:21 PM Reply Like
  • chopchop0
    , contributor
    Comments (3113) | Send Message
     
    agreed. ive always felt psx over vlo was the refiner to be in. Much more than just a simple refiner.
    23 Jan, 08:18 PM Reply Like
  • scarman59
    , contributor
    Comments (19) | Send Message
     
    Also if anyone actually bothered to read the downgrade from RJF it still is calling for "outperform" for VLO with a target price of $63 a share. That is still another 20% increase from today's price so I'm still long.
    23 Jan, 04:59 PM Reply Like
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