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Zacks energy sector analyst Sheraz A. Mian has maintained his Buy rating for oil refining company Tesoro Corporation (TSO). While leaving all other determining factors unchanged. Here we bring you some of the reasons behind his views:
'We are maintaining our Buy recommendation on Tesoro shares following the company's analyst meeting where it unveiled a five-year organic growth plan aimed at improving operating efficiencies. The company plans to spend approximately $2.1 billion on these projects that get completed in the 2008-2012 timeframe and expects incremental annual EBITDA contribution of around $980 million.
'We continue to favor Tesoro's strong leverage to the attractive West Coast market. Our price objective, recommendation, and estimates remain unchanged at this stage. Shares of independent refiners have been under pressure in recent days due to refining margin weakness.
'Despite these relatively weak near-term fundamentals, our long-term macro outlook remains favorable, particularly for the West Coast market. Tesoro's strong leverage to this key market, which got a further boost from the recent Shell refinery acquisition, is particularly valuable.
'Valuation has become particularly compelling following the recent sell-off, which offers significant upside from current levels. Our price objective remains unchanged at $62, which we determined using 2008 P/E multiple of 9.8x. We believe that Tesoro is better positioned than most of its peers in the current environment given the positive margin outlook for its core West Coast market in the longer term.'
Read the full analyst report on TSO
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