On Friday, Piper Sandler adjusted its outlook on PBF Energy (NYSE:NYSE:PBF) shares, citing persistent challenges in the refining sector. The firm has reduced the price target for PBF Energy to $47.00 from the previous $54.00, while retaining a Neutral stance on the stock. The revision reflects a 43% cut in earnings per share (EPS) estimates for the second quarter, signaling a potential 42% fall from the average Wall Street predictions.
The analyst from Piper Sandler indicated that the refining industry is facing a tough quarter due to high supply levels, with refineries operating at 95% utilization, and lackluster demand.
Consequently, the firm has revised its second quarter and full-year 2024 EBITDA (earnings before interest, taxes, depreciation, and amortization) forecasts downward by 25% and 12%, respectively. This adjustment suggests a 20% and 6% downside from the consensus estimates for the respective periods.
For the second quarter of 2024, the new EPS estimates reveal an anticipated average shortfall of 42% compared to Wall Street's expectations, which extends to a 22% downside for the full year.
Among its peers, PBF Energy, along with PARR and DINO, is identified as facing the most significant downside risk. Conversely, VLO is seen as relatively well-positioned, albeit with an anticipated 20% downside in the upcoming quarterly results.
The revised price target of $47.00 for PBF Energy is based on a sum-of-the-parts (SOTP) valuation framework for the years 2024 and 2025. This methodology involves a blended forward EV/EBITDA multiple of 3.75x for the refining and corporate segments. Additionally, the valuation takes into account the market prices of holdings in master limited partnerships (MLPs) and adjusts for non-recourse net debt.
In other recent news, PBF Energy has been the subject of revised stock price targets by two analyst firms. Piper Sandler reduced the stock's price target to $54 while maintaining a neutral rating, citing regional trends as a significant factor. The firm highlighted PBF Energy's potential benefits from the outperforming West Coast margins.
On the other hand, TD Cowen adjusted its outlook on PBF Energy, reducing the stock's price target to $45, attributing this to an unexpected decline in refining margins in April.
PBF Energy recently disclosed its financial outcomes for the first quarter of 2024, reporting an adjusted net income of $0.85 per share and adjusted EBITDA of $301.5 million. Despite operational challenges, the company remains optimistic about the future, citing strong product demand, a net cash position, and a commitment to shareholder returns.
These developments indicate a period of financial reassessment for PBF Energy. The company's focus on operational efficiency and shareholder value, along with the anticipation of a stronger gasoline market, suggest a positive outlook for the upcoming quarters.
InvestingPro Insights
As investors digest the revised outlook from Piper Sandler on PBF Energy, a look through the lens of InvestingPro data and tips can provide additional context. With a market capitalization of $5.37 billion and an attractive P/E ratio standing at 2.92, PBF Energy appears to be trading at a low revenue valuation multiple, which is underscored by the adjusted P/E ratio of 4.88 for the last twelve months as of Q1 2024. Furthermore, despite a revenue decline of 19.81% over the same period, the company maintains a gross profit margin of 6.9%. These figures suggest that while the company is experiencing challenges, it still retains some underlying financial strengths.
InvestingPro Tips highlight that management at PBF Energy has been actively buying back shares, which can be a signal of confidence in the company's value. Additionally, it's noted that cash flows can sufficiently cover interest payments, and liquid assets exceed short-term obligations, indicating a solid financial position for meeting immediate liabilities. However, it's important to consider that six analysts have revised their earnings downwards for the upcoming period, and net income is expected to drop this year.
For those considering investing in PBF Energy, there are more InvestingPro Tips available, which could further inform your decision-making process. With the use of promo code PRONEWS24, new subscribers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 10 additional InvestingPro Tips listed for PBF Energy, which could provide valuable insights into the company's performance and prospects.
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