Time to get defensive on refiner shares, Raymond James says

|By:, SA News Editor

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.