- Valero Energy (VLO -3.6%) is sharply lower after Deutsche Bank downgrades shares to Hold from Buy with a $65 price target, while HollyFrontier (HFC +2.2%) is higher following the firm's upgrade to Buy from Hold with a $38 target, raised from $30.
- Deutsche Bank says VLO remains a fundamentally strong operator with sustainably strong capture rates, but shares are fully valued current levels, trading at a historically premium 7.1x forward EBITDA, which would more than fully price in a full repeal of RINs expenses and corporate tax reform, two major tailwinds for the refinery sector in 2017.
- On HFC, the firm sees attractive leverage to key themes for the group. including RINs relief, corporate tax cuts, widening of narrow inland differentials and limited exposure to potential import/export border tax adjustments.
- Refiners are mostly lower in today's trade: TSO -3.2%, PSX +0.7%, MPC -2.7%, WNR -3.2%, PBF -4.9%, CVI +0.2%.