Credit Suisse Picks Refiners as Oil Winners for Summer
Despite much improved domestic production, a multitude of factors could converge to make the price of oil, and in turn gasoline, spike up. This comes as consumers are paying some of the highest prices at the pump in the past couple of years. With economies around the world finally starting to see some growth, an ongoing diet of geopolitical unrest in the Middle East and Ukraine, and the normal summer driving season all playing a part, the Credit Suisse energy team is a little anxious about what could he headed our way. In a new report, they raise prices on some of their top refinery names to buy.
Here are four stocks getting an increase in their price target at Credit Suisse. They are all rated Outperform.
Alon USA Energy Inc. (NYSE: ALJ) leads off the list of stocks getting a boost in their target prices at Credit Suisse. Alon Partners owns and operates a crude oil refinery in Big Spring, Texas, with total throughput capacity of approximately 70,000 barrels per day. Alon Partners refines crude oil into finished products, which are marketed primarily in West Texas, Central Texas, Oklahoma, New Mexico and Arizona through its wholesale distribution network to both Alon Energy’s retail convenience stores and other third-party distributors. Investors are paid a 1.6% dividend. Credit Suisse raises its price target from $22 to $23. The Thomson/First Call estimate is set at $19.25. The stock closed Friday at $15.11 a share, so a move to the Credit Suisse target would be a strong 52% gain.
Delek US Holdings Inc. (NYSE: DK) is a diversified downstream energy company with assets in petroleum refining, logistics and convenience store retailing. The refining segment consists of refineries operated in Tyler, Texas, and El Dorado, Ark., with a combined nameplate production capacity of 140,000 barrels per day. The stock is another Permian Basin play, and Credit Suisse is bullish on the prospects. Investors are paid a 2% dividend. The Credit Suisse price target goes from $40 to $42. The consensus target is $38.93. Shares ended Friday at $30.66.
HollyFrontier Corp. (NYSE: HFC) is another stock that is expected to benefit from the Permian strength, and Credit Suisse and other firms see the company strengthening margins in the coming quarters. The company is another top independent petroleum refiner and marketer that produces high-value light products such as gasoline, diesel fuel, jet fuel and other specialty products. Investors are paid a 2.4% dividend. Credit Suisse raises its price target from $62 to $64, and the consensus target is $53.59. HollyFrontier closed Friday at $49.40.
Western Refining Inc. (NYSE: WNR) got a slew of earnings revisions from around Wall Street last month, with some firms raising estimates for 2014 and 2015 as much as 8%. The refining segment operates refineries in El Paso, and Gallup, N.M. The Wholesale segment includes a fleet of crude oil and finished product truck transports, and wholesale petroleum products operations in nine American states. Investors are paid a solid 2.7% dividend. The Credit Suisse price target goes from $51 to $53, and the consensus target is $47.21. The stock closed Friday at $40.02.
While the refining stocks have had a solid run, and for the most part have dodged some of the market volatility, things could look even better for the top names in the second half of 2014. Investors looking for solid growth who have a medium risk tolerance could find any of the top Credit Suisse names as solid portfolio additions.