On Friday, TD Cowen adjusted its outlook on PBF Energy (NYSE: NYSE:PBF), reducing the stock's price target from $54.00 to $45.00, while keeping a Hold rating. The revision follows a period where investors have shown increased pessimism towards refinery stocks, attributed to an unexpected decline in refining margins in April. This downturn contrasts with the stronger-than-usual performance observed in February and March, coupled with high valuations as earnings reports loom.
The firm noted that the current breakeven margins for less complex international refining operations might suggest that the margins are reaching a floor. Historically, spot crack spreads, which measure refining margins, have shown improvement in May. Additionally, near-term futures typically experience their most significant gains during this month. These trends could bode well for refinery operators in the upcoming weeks.
For PBF Energy in particular, the stock's underperformance following its earnings report may be partly due to a 4% unexpected increase in the number of shares outstanding. Despite the reduced price target, TD Cowen anticipates that PBF Energy could still benefit in the near term from seasonal margin improvements and potentially strong gasoline margins on the West Coast during the summer.
However, the firm also cautions that PBF Energy's stock might face downward pressure after the summer season. The lowered price target to $45 is based on a revised earnings forecast for the years 2024 to 2026, utilizing a methodology that focuses on sustained free cash flow yield.
InvestingPro Insights
TD Cowen's recent adjustment of PBF Energy's price target coincides with a notable period for the company, as reflected in the latest data and analysis from InvestingPro. The company's management has demonstrated confidence through an aggressive share buyback strategy, signaling a bullish stance on the company's value. Additionally, the sentiment among analysts is optimistic, with 6 analysts revising their earnings upwards for the upcoming period, which could indicate a brighter outlook than the market currently perceives.
InvestingPro Data shows PBF Energy with a market capitalization of $6.25 billion and a compelling P/E ratio of 3.42, which becomes even more interesting when adjusted for the last twelve months as of Q1 2024, at 5.66. Despite a recent hit to the stock price, with a one-week total return of -8.97%, the company has shown a high return over the last year, at 65.48%. This performance is particularly noteworthy in the context of the industry and the broader market.
Moreover, PBF Energy's gross profit margin stands at 6.9%, which, while considered weak, is part of a complex picture that includes a significant return on assets at 13.69% for the same period. For investors seeking additional insights, there are more InvestingPro Tips available, which can provide a deeper dive into PBF Energy's financial health and future prospects. To access these tips and leverage the full potential of investing analysis, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. Currently, there are 5 additional tips listed on InvestingPro that can further guide investment decisions regarding PBF Energy.
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