On Wednesday, Mizuho Securities initiated coverage on Par Petroleum (NYSE:PARR), assigning the stock an Outperform rating with a price target of $33.00 per share. The firm highlighted Par Petroleum's unique position as a small, independent refiner with a focus on specific geographical markets in the United States.
Par Petroleum operates primarily on the West Coast, including Hawaii and the Pacific Northwest, as well as in the Rockies, encompassing Wyoming and Montana. Mizuho pointed out that the company's market diversity and robust logistics and retail assets set it apart from other small-cap refiners, such as CVR Energy (NYSE:CVI) and Delek US Holdings (NYSE:DK).
The firm noted that Par Petroleum's stable cash flow from its logistics and retail units could mitigate the volatility of refining results, thereby improving the margins of its refining operations in these logistically challenging markets. Furthermore, the company's product yield is heavily weighted towards distillates, accounting for approximately 51%, which is well-suited to its target markets.
Despite the challenges posed by weak Asian markets and exposure to Western Canadian Select (WCS) crude oil, Mizuho believes that Par Petroleum's stock is trading at a discount to its peers on key financial metrics. The firm's initiation of coverage with an Outperform rating reflects a positive outlook on the company's future performance.
In other recent news, Par Petroleum has seen a flurry of activity. Investment firm Piper Sandler revised its outlook on the company, reducing the price target from $43.00 to $37.00 due to a decrease in the expected earnings before interest, taxes, depreciation, and amortization (EBITDA) for the second quarter and full year of 2024. The firm's analyst projected an average downside to Street estimates of 42% for the second quarter of 2024 and 22% for the full year.
Amid these revisions, Par Petroleum has entered into a crude oil procurement deal with Citigroup Energy Inc. This coincides with the termination of its previous agreement with J. Aron & Company LLC. Additionally, the company has increased its existing asset-based revolving credit facility to $1.4 billion.
These recent developments come on the heels of Par Petroleum's strong first-quarter financial performance, with an adjusted EBITDA of $95 million and adjusted net income of $0.69 per share. The company's renewable fuel initiatives are progressing, and it maintains a strong balance sheet with over $575 million in liquidity.
Despite the revised outlook from Piper Sandler and TD Cowen, the company continues to focus on strategic growth and operational efficiency.
InvestingPro Insights
As Mizuho Securities shines a spotlight on Par Petroleum's market position, real-time data from InvestingPro further enriches the narrative. The company's management has been strategically repurchasing shares, signaling confidence in the company's value and future prospects. Additionally, Par Petroleum's stock is characterized by low price volatility, which may appeal to investors seeking stability in their portfolios. These strategic moves are complemented by the company's low revenue valuation multiple, which could indicate a potential undervaluation relative to its earnings.
InvestingPro data underscores the financial health of Par Petroleum with a market capitalization of $1.42 billion USD and a compelling P/E ratio of 3, which drops even lower to 2.85 when adjusted for the last twelve months as of Q1 2024. This is coupled with a significant revenue growth of 11.37% over the same period, demonstrating the company's ability to expand its financial base amidst market challenges.
For those interested in deeper insights, there are additional InvestingPro Tips available, which could provide a more nuanced understanding of Par Petroleum's financial landscape. To explore these further, visit https://www.investing.com/pro/PARR and remember to use coupon code PRONEWS24 for up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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