Investing.com — Mizuho Securities on Thursday downgraded U.S. refiners Phillips 66, Delek US Holdings and Par Pacific Holdings to “neutral” from “outperform”, saying the rise in refining stocks has mostly priced in higher earnings and left the group with only about 4% average upside to its raised price targets.
The brokerage said it was moving “to the sidelines” even as it raised price targets across U.S. refiners by about 40% on average. The increases reflect higher and longer-lasting assumptions for crack spreads, the refining margin between crude oil and the fuels made from it.
Mizuho now models a blended U.S. crack of about $42 a barrel in 2026 and $34 in 2027, easing to about $28 from 2028. Its long-term assumption was about $24 previously.
It said the Middle East conflict has dragged on, compounded by Russia-Ukraine escalation and lower global utilization, with Chinese exports notably contained.
Refining stocks are up about 152% this year, versus gains of about 42% for XLE, 48% for XOP and 14% for the S&P 500, Mizuho said.
On two-year forward estimates, the group trades at about 8.5 times enterprise value to EBITDA, roughly two standard deviations above its historical average of about 6.7 times.
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Phillips 66 price target rises to $300 from $220, which offers about 10% upside. Mizuho said the current stock price already reflects much of the company’s refining improvements and near-term earnings gain from higher crack spreads.
Delek US target rises to $83 from $66. The stock is up more than 150% this year, and a key catalyst, small refinery exemptions, has already been granted for 2025, Mizuho said.
Par Pacific target rises to $91 from $85, offering about 6% upside. Mizuho said the price adequately reflects expected earnings, and it flagged Brent-linked crude supply at the company’s Hawaii refinery as a relative risk.
Mizuho kept “neutral” ratings on Valero Energy, Marathon Petroleum, HF Sinclair and PBF Energy, with targets of $434, $457, $119 and $89. It kept CVR Energy at “underperform” with a $52 target, below the $57.38 share price.
The brokerage said it would position for further refining upside through international oil companies, including “outperform”-rated BP, which has a $56 target against a $44.51 share price.
Mizuho expects U.S. refineries to be pushed hard. U.S. refinery utilization hit a record 96.3% in the third quarter, while gasoline and diesel-type fuel inventories remain near the bottom of their historical ranges. It estimates capacity lost to maintenance will rise to nearly 7% in 2027 from about 5% in 2026, which could keep margins elevated before they ease.
Source: finance.yahoo.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.
