Shares of oil refiners have struggled following Q1 earnings season and the trade war escalation, but Cowen analyst Jason Gabelman sees a buying opportunity, as the margins refiners earn for processing gasoline have been strong.
"Trade concerns are weighing on the overall group more than improving refining margins," Gabelman says, but he expects some refiners - Valero (NYSE:VLO), Delek (NYSE:DK) and Phillips 66 (NYSE:PSX) - to outperform because of "continued margin support."
VLO is well positioned because its margins should stay strong and it should benefit from upcoming regulations that will make shippers use low-sulfur fuel; Gabelman sees shares rising as high as $112.
DK also in good shape because of a strong stock buyback program and a plan to invest in pipelines, according to Gabelman, who thinks the stock could climb to $49.
PSX "looks the most discounted within the group," Gabelman writes, believing shares could rise to $118.
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