Yahoo Finance Tesoro’s Analyst Ratings: Why Are Most Saying ‘Hold’?
Is Tesoro Evolving into an Integrated Downstream Player?
Tesoro’s analyst ratings
In the previous part, we looked at Tesoro’s (TSO) stock performance. In this part, we’ll examine the ratings of analysts who cover the stock.
Tesoro’s analyst ratings show that 47% of the surveyed analysts covering the stock rate it a “buy.” The remaining rate it a “hold.” The highest 12-month price target for TSO is $125, indicating a 65% rise from current levels. There are no “sell” ratings. In fact, even the lowest price target of $87 implies a rise of 15%. The average 12-month price target stands at $106, indicating a 39% rise from current levels.
Tesoro’s peers HollyFrontier (HFC), Western Refining (WNR), and PBF Energy (PBF) have been rated “buy” by 35%, 43%, and 67% of analysts, respectively. The iShares Global Energy ETF (IXC) has ~5% exposure to oil refining sector stocks.
Tesoro’s recent strategic moves
Tesoro (TSO) has been strategizing to cut capex (capital expenditures) to combat lower commodity prices. For 2016, Tesoro has cut its capex guidance by ~$500 million to ~$1 billion, of which ~$300 million is for Tesoro Logistics (TLLP). However, the company continues to focus on its ongoing viable growth projects. We’ll take a look at TSO’s growth plans later in the series.
In 1Q16, TSO incurred capex of $188 million, including TLLP. Tesoro has closed the acquisition of Great Northern Midstream, which has vast logistics assets in the Williston Basin of North Dakota. To provide growth impetus to TLLP, TSO has carried out a drop-down transaction consisting of Los Angeles storage and pipeline assets for $500 million.
In the past couple of quarters, a weaker refining environment has pressured earnings of downstream companies. In this scenario, companies are cutting capex and operating costs, and optimizing value chains. Until refining earnings improve, analysts will likely adopt a cautious approach and continue to rate the stock a “hold.”
Next, let’s see how Tesoro’s refining margin has shaped up in 1Q16.
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