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The worst is over for top U.S. refiners, Goldman says in Valero upgrade

  • Valero Energy (VLO +2%) is upgraded to Buy from Neutral with a $96 price target at Goldman Sachs, as analyst Neil Mehta sees an opportunity to buy into higher quality U.S. refiners at a discount after the group pulled back ~10% in the past month.
  • Mehta sees underappreciated value in the renewable diesel segment given the focus on emissions reductions globally, and thinks VLO is positively leveraged to the IMO's 2020 emissions reduction rules.
  • VLO also should benefit from increased flows of crude to the U.S. Gulf Coast, where much of VLO's refining capacity is located, and Mehta finds the stock's valuation compelling at current levels, with a dividend yield approaching 5% and projected free cash flow yield of 10% through next year.
  • Mehta also likes Marathon Petroleum (MPC +0.9%) - which is on Goldman's Conviction Buy List - as well as Buy-rated Phillips 66 (PSX +0.4%) and Par Pacific (PARR -0.6%).

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SymbolLast Price% Chg
VLO--
Valero Energy Corporation
MPC--
Marathon Petroleum Corporation
PSX--
Phillips 66
PARR--
Par Pacific Holdings, Inc.