PBF Energy (NYSE:PBF) trades little changed Wednesday even as J.P. Morgan upgraded shares to Overweight from Neutral with a $43 price target, saying the company "has the most potential for a rate of change story in terms of returns of capital to shareholders."
While PBF (PBF) has been the top performer in the refining group YTD, shares have shed nearly a third since their June peak, and JPM analyst Phil Gresh sees current levels as highly attractive given improvements in the company's balance sheet.
The company has created significant equity value by reducing net debt, where Gresh's year-end 2023 estimate of ~$900M is a $2B-plus reduction over December's forecast, driven largely by ~$1.8B in H1 2022 free cash flow and ~$2.3B expected over the next 18 months.
PBF (PBF) so far has maintained a focus on the balance sheet while others have shifted to dividends and buybacks, and Gresh believes PBF shares could benefit from an announcement of a base dividend or a special dividend/stock buyback, which likely would not come until mid-2023 or early 2024 but could be signaled earlier.
PBF Energy (PBF) enjoyed a massive cash windfall in Q2, which reduced its net debt by nearly two-thirds, but the company has not reinstated its dividend, Daniel Thurecht writes in an analysis posted recently on Seeking Alpha.