On Friday, Piper Sandler, a financial services firm, adjusted its outlook on Phillips 66 (NYSE:NYSE:PSX), increasing the stock's price target to $187 from the previous $169. The firm retained its Overweight rating on the shares. The revision reflects a more optimistic assessment of the company's medium-term earnings potential.
In a recent statement, the firm addressed widespread inquiries regarding the valuation of refining stocks. Contrary to the belief that current stock prices anticipate another year of exceptionally high margins in 2025, the firm's analysis suggests that the sector remains reasonably priced when considering a longer-term perspective.
Piper Sandler's reassessment of the "mid-cycle" earnings before interest, taxes, depreciation, and amortization (EBITDA) for U.S. refiners indicates that the current stock prices largely factor in these mid-cycle EBITDA projections for 2025. This evaluation takes into account the impact of ongoing share repurchases.
The firm noted that small to mid-sized companies, particularly PBF Energy (NYSE:PBF) and Delek US Holdings (NYSE:DK), appear to offer the largest discounts. However, among the larger-cap names, Phillips 66 and Valero Energy (NYSE:VLO) are seen as having the most significant long-term upside potential.
In light of the recalibrated earnings estimates, Piper Sandler has raised its price targets for several companies in the refining sector, including Delek US Holdings (to $70), Marathon Petroleum (NYSE:MPC) (to $204), Par Pacific Holdings (NYSE:PARR) (to $47), PBF Energy (to $61), and Phillips 66 (to $187).
Despite the overall positive adjustments, the firm expressed a more cautious short-term stance due to the recent surge in stock prices and seasonal trends that suggest a more conservative approach is warranted.
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