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The Zacks Analyst Blog Highlights: Valero Energy, Tesoro, HollyFrontier and Alon USA Energy

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For Immediate Release

Chicago, IL - September 08, 2015 - Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Valero Energy Corp. ( VLO ) , Tesoro Corp. ( TSO ) , HollyFrontier Corp. ( HFC ) and Alon USA Energy Inc. ( ALJ ) .

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free .

Here are highlights from Friday's Analyst Blog:

Grab These 4 Oil Refiners with Rising Earnings Estimates

The free-fall in oil prices have made 'energy' the most talked-about sector of the entire market in 2015, apart from the fact that its performance has been the worst. Year-to-date, 'The Energy Select Sector SPDR' has posted a loss of 18%. On the other hand, the broad-based Dow Jones Industrial Average and the S&P 500 index shed just 8% and 5%, respectively, over the same period.

As of now, crude prices are trading around $45-a-barrel after hitting a new 6-1/2 year low of $37.75 recently. This, despite a short spike that saw the commodity scale a year-high of $61.43 per barrel in June.

Oil is facing the heat on several fronts. Perhaps, the most important of them pertains to the mounting worries about China's crude demand. In particular, the Asian giant's currency devaluation has stoked speculation about soft economic growth in the world's No. 2 energy consumer.

What's more, in the absence of production cuts from OPEC, the effects of booming shale supplies in North America and a stagnant European economy, not much upside is expected in oil prices in the near term. Moreover, a stronger dollar has made the greenback-priced crude more expensive for investors holding foreign currency. The Iranian nuclear framework agreement, which has the potential to release more of the commodity in the already oversupplied market, has put the final nail in the coffin.

As it is, with inventories near the highest level during this time of the year in 80 years at least, crude is very well stocked. On top of that, OPEC members (like Saudi Arabia) have made it clear time and again that they are more intent on preserving market share rather than attempting to arrest the price decline through production cuts. Therefore, the commodity is likely to maintain its low trajectory throughout 2015.

Oil Refining & Marketing: Operating Environment Remain Strong

Investors need not fear energy stocks, as there are still a handful of them that are showing strength during this shaky period. In particular, with oil prices cooling off, U.S. downstream (refining and marketing) stocks have been notching up healthy gains and earnings beats.

The business of the downstream players is negatively correlated with crude prices. This is because the companies use oil as an input from which they derive refined petroleum products like gasoline, the prime transportation fuel in the U.S. Hence, lower the oil price, higher will be their profits.

To add to this, robust demand for gasoline (the most widely used petroleum product) has lifted crack spreads and is set to provide further upside to the companies' bottom line.

Finally, in order to take advantage of the strong gasoline demand and higher margins, the companies are operating their units at record high capacity, sometimes at more than 100%. Therefore, the future looks bright indeed, regardless of their share prices hovering close to 52-week highs.

Supported by a Good Zacks Industry Rank

Most of the securities in the oil refining and marketing space is seeing solid earnings estimate revision activity, and is in great company from a Zacks Industry Rank perspective.

This is important because, often times, a rising tide will lift all boats in an industry, as there can be broad trends taking place in a segment that are boosting securities across the board. This is arguably taking place in the oil refining and marketing space as it currently has a Zacks Industry Rank #38 - comfortably placing it into the top 1/3rd of the 260+ industry groups - suggesting it is well-positioned from this perspective, especially when compared to other segments out there.

4 Stocks to Consider Buying

For investors wanting to take advantage of the bullish oil refining landscape, we present four companies that may deserve attention. Each of them also has a good Zacks Rank.

Valero Energy Corp. ( VLO ): It is the largest independent refiner and marketer of petroleum products in the U.S. It has a refining capacity of 2.9 million Bbl/d across 15 refineries located throughout the U.S., Canada and the Caribbean. Over the past month, current quarter estimates for the San Antonio, TX-based downstream operator have risen from $2.28 per share to $2.32 per share, helping Valero to consolidate its Zacks Rank #2 (Buy), further underscoring the company's solid position.

Tesoro Corp. ( TSO ): San Antonio, TX-based Tesoro Corp. is one the biggest independent oil refiners in the U.S. The Zacks Rank #2 company owns and operates six refineries in the western U.S., with a combined crude oil processing capacity of approximately 850,000 barrels per day (Bbl/d). For the current quarter, we have seen 6 estimates moving up in the past 30 days, compared with no downward revision. This trend has caused the Zacks Consensus Estimate to jump higher, going from $2.70 per share a month ago to its current level of $4.49.

HollyFrontier Corp. ( HFC ): Headquartered in Dallas, TX, HollyFrontier Corp. is an independent petroleum refiner and marketer, which manufactures gasoline, diesel fuel, jet fuel and other specialty products. The Zacks Rank #2 company's refining capacity is 443,000 Bbl/d, with a network of processing units spread over the Midwest. Quarterly earnings projections for this Zacks Rank #2 company are also on an upswing with the Zacks Consensus Estimate for the third quarter climbing 30 cents (or 26%) to $1.47 over the past month.

Alon USA Energy Inc. ( ALJ ): Based in Dallas, TX, Alon USA Energy is an independent refiner and marketer of petroleum products, with primary operations in the South Central, Southwestern and Western regions of the U.S. The company - sporting a Zacks Rank #2 - owns a 74,000 barrels per day (Bbl/d) crude oil refinery in Krotz Springs, Louisiana and a 70,000 Bbl/d unit in California. On the earnings revision front, Alon USA's current quarter estimates have shown an upside of 56% to 53 cents per share in the past month.

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VALERO ENERGY (VLO): Free Stock Analysis Report

TESORO CORP (TSO): Free Stock Analysis Report

HOLLYFRONTIER (HFC): Free Stock Analysis Report

ALON USA ENERGY (ALJ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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