On Thursday, BofA Securities resumed coverage on PBF Energy (NYSE: NYSE:PBF), assigning an Underperform rating to the stock with a new price target of $25.00. The firm's analyst highlighted PBF Energy's composition, noting that the company operates with 80% of its business in Refining and the remaining 20% in Logistics. The analyst pointed out that PBF Energy is considered the "purest play refiner" due to nearly all of its Logistics services supporting PBF's own refineries.
The analysis by BofA Securities also brought attention to the volatility of PBF Energy's stock, which has historically been highly responsive to refining margins, also known as refining cracks. The expectation set by the analyst is that refining cracks are anticipated to enter an extended period of decline.
Additionally, the report indicated that approximately half of PBF's refineries rank in the bottom quartile in terms of performance. Moreover, the location of most of these refineries is in the PADD1/2/5 markets, which are characterized by lower duration, suggesting a potential impact on the longevity and profitability of the company's operations.
Despite PBF Energy's stock being cheaper compared to its peers, the BofA Securities analyst attributed this lower valuation to the fundamental value associated with the company's shorter life refineries, rather than seeing it as an investment opportunity. The new price target reflects a cautious stance on the stock's future performance.
In other recent news, PBF Energy's financial performance has been the subject of multiple analyst reviews. Citi revised its price target for PBF Energy to $37.00, anticipating a trend towards the lower end of the company's $1-$1.5 billion cash balance target. The firm also projected a third-quarter loss of $1.33 per share for PBF Energy, a more pessimistic forecast compared to the consensus estimate.
BMO Capital Markets downgraded PBF Energy to Market Perform from Outperform, citing its position as a higher-cost refiner that could potentially face tighter margins and earnings. The firm's revised price target for the company stands at $35.00. Meanwhile, another financial firm maintained an Underweight rating for PBF Energy, with a steady price target of $25.00, following a revision of the company's third-quarter earnings projections.
JPMorgan downgraded PBF Energy from Overweight to Neutral, decreasing the price target to $40.00. The firm suggested that investors may prefer larger-cap refiners in the current market environment. Similarly, Piper Sandler downgraded PBF Energy's stock rating to 'Underweight' due to concerns over the company's future financial performance, setting a new price target of $25.00.
Despite these challenges, PBF Energy has made significant strides in reducing its debt and strengthening its balance sheet. The company also plans to double its production from the Trans Mountain Expansion pipeline by the end of the year and remains optimistic about the medium to long-term outlook for its renewable diesel business. These recent developments underscore PBF Energy's strategic focus on addressing regional supply deficits and increasing production amidst a challenging market environment.
InvestingPro Insights
Recent data from InvestingPro provides additional context to BofA Securities' analysis of PBF Energy. The company's P/E ratio of 5.03 and Price to Book ratio of 0.61 as of the last twelve months ending Q2 2024 suggest that the stock is indeed trading at a relatively low valuation, aligning with the analyst's observation of PBF being cheaper than its peers.
However, the company's financial health presents a mixed picture. While PBF Energy has been profitable over the last twelve months, with a gross profit of $2.1 billion, its gross profit margin stands at a modest 5.66%. This low margin could be a contributing factor to the analyst's concerns about the company's performance, especially considering that half of PBF's refineries rank in the bottom quartile.
InvestingPro Tips highlight that management has been aggressively buying back shares, which could be seen as a vote of confidence in the company's future. However, it's worth noting that 11 analysts have revised their earnings downwards for the upcoming period, potentially reflecting the anticipated decline in refining cracks mentioned in the BofA Securities report.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for PBF Energy, providing a deeper understanding of the company's financial position and market performance.
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