On Monday, Mizuho (NYSE:MFG) Securities adjusted its stance on PBF Energy (NYSE:NYSE:PBF), downgrading the stock from Neutral to Underperform and lowering the price target from $33 to $31. The stock, currently trading at $29.26, has fallen nearly 53% from its 52-week high of $62.88.
According to InvestingPro data, six analysts have recently revised their earnings estimates downward for the upcoming period, suggesting broader concerns about the company's near-term prospects.
The firm anticipates that refining crack spreads will continue to be under pressure in the short to medium term. This forecast is based on the expectation of global capacity increases in 2025, planned shutdowns occurring later in the year, and a lag in demand growth which will take time to match the new supply.
PBF's financial metrics support these concerns, with InvestingPro data showing a significant revenue decline of 12.8% over the last twelve months and notably weak gross profit margins of 1.75%. For deeper insights into PBF's financial health and future prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
The revision reflects concerns about the upcoming closure of LyondellBasell's Houston refinery in the first quarter of 2025 and the PSX's Los Angeles refinery in the fourth quarter of 2025. Analysts at Mizuho believe that the full impact of these shutdowns on supply will be felt later in 2025 and into 2026, as inventories are depleted. This delayed effect is expected to contribute to a tightening of the market later rather than sooner.
PBF Energy, being a pure refining play within Mizuho's coverage, is considered to be particularly vulnerable to the anticipated weakness in crack spreads. Additionally, the firm's benefit from wider crude differentials may be limited in the near term, as OPEC+ has postponed returning to higher production levels in response to current global market softness.
Mizuho also points out that U.S. product demand typically weakens during the winter months and that refineries have mostly finished their planned turnarounds for the year. However, the consequent decline in margins has not been completely factored into the earnings estimates for the fourth quarter of 2024 and the first quarter of 2025. The expected downward revisions in earnings are likely to contribute to the negative momentum for PBF Energy's stock.
Based on InvestingPro's Fair Value analysis, the stock appears to be fairly valued at current levels, though investors should note that additional ProTips and detailed valuation metrics are available with an InvestingPro subscription.
In other recent news, PBF Energy Inc. experienced a difficult third quarter in 2024, reporting an adjusted net loss of $1.50 per share and an adjusted EBITDA loss of $60.1 million.
Despite these losses, the company exhibited confidence in its financial stability by announcing a 10% increase in its dividend. Mizuho Securities revised its price target for PBF Energy to $33, down from $36, maintaining a neutral rating due to weaker refining margins.
In addition to these developments, PBF Energy announced changes in executive compensation, including long-term incentive awards for their named executive officers.
These awards, approved by the Compensation Committee of the Board of Directors, include restricted shares of Class A common stock, performance share units, and performance units with payouts contingent on the company's total shareholder return rankings relative to its peers from January 1, 2025, through December 31, 2027.
Furthermore, PBF Energy disclosed new compensatory arrangements for its executive officers as part of its long-term incentive plan, which includes a mix of restricted stock, performance share units, and performance units.
The company also revealed plans for capital expenditures for 2025 to be between $750 million to $800 million, and is targeting $200 million in run rate cash savings by the end of 2025.
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