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PBF Energy Downgraded To Neutral At JPMorgan, Says Risk/Return Is 'Fair'

The valuation and leverage combination of PBF Energy Inc PBF appears less compelling, JPMorgan’s Phil Gresh said in a report. He downgraded the rating for the company from Overweight to Neutral, while reducing the price target from $33 to $21.

“PBF is a unique acquisition story in the refining space with growing geographic diversification, now with exposure in the legacy East Coast and Mid-Con regions in addition to recent acquisitions in the Gulf Coast (Chalmette) and West Coast (Torrance),” analyst Phil Gresh wrote.

PBF Energy’s heavy crude slate and the company’s position in markets that are short products, namely East Coast and LA, offer an advantage. Execution on the Chalmette and Torrance acquisitions could lend upside in the future. For now, “the risk/return profile appears fair,” Gresh commented.

Estimates Reduced

The 2Q estimates have been reduced again, “as cracks softened in the final weeks of 2Q and capture rates (e.g., tight crude diffs, rising RINs) now look even more negative than we thought q/q,” the analyst said. Full-year estimates have also been reduced, since strip cracks have continued to decline in early 3Q.

The EPS estimates for 2Q and 2016 have been reduced from $0.68 to $0.20 and from $1.25 to $(0.50), respectively.

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DateFirmActionFromTo
Jul 2016JP MorganDowngradesOverweightNeutral
Jun 2016Goldman SachsDowngradesBuyNeutral
Jun 2016JP MorganMaintainsOverweight

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