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Here's Why Hold Strategy is Apt for PBF Energy (PBF) Now
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PBF Energy (PBF - Free Report) has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.
The stock, currently carrying a Zacks Rank #3 (Hold), has rallied 10.4% in the past six months compared with 6.4% growth of the composite stocks belonging to the industry.
Image Source: Zacks Investment Research
Factors Driving the Stock
Favorable Style Score
PBF Energy has an impressive Value Score of A. Value Score helps find stocks that are undervalued. Back-tested results have shown that stocks with a favorable Value Score and a solid Zacks Rank are the best investment bets.
Impressive Earnings Surprise History
PBF Energy’s bottom line has outpaced estimates in three of the trailing four quarters and missed the same once.
Strong Cash Position
PBF's balance sheet is fortified with a significant cash reserve of $1.4 billion as of Mar 31, 2024. This strong liquidity position allows the company to navigate market fluctuations and invest in growth opportunities without compromising financial stability. Additionally, the company has $1.2 billion of total debt, indicating a healthy net cash position, which provides a buffer against economic uncertainties and supports strategic initiatives.
Consistent Shareholder Returns
PBF Energy has demonstrated a commitment to returning value to shareholders through dividends and share repurchases. In the first quarter of 2024, the company declared a quarterly dividend of $0.25 per share, an increase from previous quarters, and repurchased 2.6 million shares for around $125 million. This approach not only signals confidence in the company's financial health but also enhances shareholder value by reducing the number of outstanding shares.
Renewable Energy Initiatives
The company's strategic diversification into renewable fuels positions it well for growth in the energy transition landscape. The St. Bernard Renewables (“SBR”) venture, a 50-50 partnership with Eni, has commenced renewable diesel production, with an annual capacity of approximately 320 million gallons. This initiative not only aligns with global sustainability trends but also provides PBF with a new revenue stream and potential for significant carbon credit generation, enhancing overall profitability and sustainability.
Key Business Tailwinds
PBF Energy's diversified asset base across key refining regions in the United States offers a competitive advantage. The company operates high-complexity refineries with a combined throughput capacity of over 1 million barrels per day, spread across the East Coast, Gulf Coast, Mid-Continent and West Coast. This geographic diversification allows the company to optimize operations and capture margin improvements across different markets, mitigating regional market risks.
PBF Energy's disciplined capital allocation strategy focuses on long-term value creation. The company plans to invest $800-$850 million in refining capital expenditure in 2024, aiming to enhance operational efficiency and capacity. This investment includes significant planned maintenance activities to ensure the reliability and safety of its refineries, positioning the company to capitalize on market opportunities as demand for refined products remains strong.
The refining industry is currently experiencing favorable market dynamics, with resilient demand for refined products and tight global inventory levels. PBF Energy benefits from this environment, as reduced refining capacity in the United States and sustained demand support strong refining margins. This market backdrop provides a conducive environment for PBF to generate robust cash flows and maintain profitability.
PBF Energy is advancing its environmental, social and governance (ESG) initiatives by developing clean energy projects, including the MACH2 clean hydrogen hub on the East Coast. This project aims to produce green hydrogen and develop related infrastructure, supported by up to $750 million from the Department of Energy. Such initiatives not only enhance PBF's ESG credentials but also position the company as a leader in the transition to a low-carbon economy, potentially attracting ESG-focused investors.
The company has demonstrated effective cost management and operational efficiency, with first-quarter 2024 operating expenses decreasing from the same period in 2023. This focus on cost control, combined with strategic investments in margin-improvement projects, ensures that PBF can maintain competitive operational performance and profitability, even in challenging market conditions.
Transportadora’s midstream asset portfolio has Latin America's most extensive natural gas pipeline network. It generates stable fee-based revenues since its pipeline assets transport more than 60% of the gas consumed in Argentina.
Transportadora has witnessed upward estimate revisions for its 2024 bottom line in the past 60 days. The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at 77 cents and $1.81, respectively. TGS currently has a Growth Score of A and B for Value.
Sunoco is a leading wholesale motor fuel distributor in the United States, boasting a vast distribution network spanning 40 states. With long-term contracts servicing more than 10,000 convenience stores, it distributes more than 10 fuel brands, ensuring a stable revenue stream.
The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $7.29 and $7.17, respectively. The partnership has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days. SUN currently has a Value and Growth Score of A.
GeoPark, based in Hamilton, Bermuda, is an explorer, operator and consolidator in the oil and gas sector. The company primarily operates in Chile, Colombia, Brazil and Argentina. It has a Zacks Style Score of A for Value and B for Growth.
The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $3.23 and $3.98, respectively. The company has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.
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Here's Why Hold Strategy is Apt for PBF Energy (PBF) Now
PBF Energy (PBF - Free Report) has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.
The stock, currently carrying a Zacks Rank #3 (Hold), has rallied 10.4% in the past six months compared with 6.4% growth of the composite stocks belonging to the industry.
Image Source: Zacks Investment Research
Factors Driving the Stock
Favorable Style Score
PBF Energy has an impressive Value Score of A. Value Score helps find stocks that are undervalued. Back-tested results have shown that stocks with a favorable Value Score and a solid Zacks Rank are the best investment bets.
Impressive Earnings Surprise History
PBF Energy’s bottom line has outpaced estimates in three of the trailing four quarters and missed the same once.
Strong Cash Position
PBF's balance sheet is fortified with a significant cash reserve of $1.4 billion as of Mar 31, 2024. This strong liquidity position allows the company to navigate market fluctuations and invest in growth opportunities without compromising financial stability. Additionally, the company has $1.2 billion of total debt, indicating a healthy net cash position, which provides a buffer against economic uncertainties and supports strategic initiatives.
Consistent Shareholder Returns
PBF Energy has demonstrated a commitment to returning value to shareholders through dividends and share repurchases. In the first quarter of 2024, the company declared a quarterly dividend of $0.25 per share, an increase from previous quarters, and repurchased 2.6 million shares for around $125 million. This approach not only signals confidence in the company's financial health but also enhances shareholder value by reducing the number of outstanding shares.
Renewable Energy Initiatives
The company's strategic diversification into renewable fuels positions it well for growth in the energy transition landscape. The St. Bernard Renewables (“SBR”) venture, a 50-50 partnership with Eni, has commenced renewable diesel production, with an annual capacity of approximately 320 million gallons. This initiative not only aligns with global sustainability trends but also provides PBF with a new revenue stream and potential for significant carbon credit generation, enhancing overall profitability and sustainability.
Key Business Tailwinds
PBF Energy's diversified asset base across key refining regions in the United States offers a competitive advantage. The company operates high-complexity refineries with a combined throughput capacity of over 1 million barrels per day, spread across the East Coast, Gulf Coast, Mid-Continent and West Coast. This geographic diversification allows the company to optimize operations and capture margin improvements across different markets, mitigating regional market risks.
PBF Energy's disciplined capital allocation strategy focuses on long-term value creation. The company plans to invest $800-$850 million in refining capital expenditure in 2024, aiming to enhance operational efficiency and capacity. This investment includes significant planned maintenance activities to ensure the reliability and safety of its refineries, positioning the company to capitalize on market opportunities as demand for refined products remains strong.
The refining industry is currently experiencing favorable market dynamics, with resilient demand for refined products and tight global inventory levels. PBF Energy benefits from this environment, as reduced refining capacity in the United States and sustained demand support strong refining margins. This market backdrop provides a conducive environment for PBF to generate robust cash flows and maintain profitability.
PBF Energy is advancing its environmental, social and governance (ESG) initiatives by developing clean energy projects, including the MACH2 clean hydrogen hub on the East Coast. This project aims to produce green hydrogen and develop related infrastructure, supported by up to $750 million from the Department of Energy. Such initiatives not only enhance PBF's ESG credentials but also position the company as a leader in the transition to a low-carbon economy, potentially attracting ESG-focused investors.
The company has demonstrated effective cost management and operational efficiency, with first-quarter 2024 operating expenses decreasing from the same period in 2023. This focus on cost control, combined with strategic investments in margin-improvement projects, ensures that PBF can maintain competitive operational performance and profitability, even in challenging market conditions.
Stocks to Consider
Investors interested in the energy sector may look at some better-ranked stocks like Transportadora (TGS - Free Report) , Sunoco LP (SUN - Free Report) and GeoPark Ltd. (GPRK - Free Report) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Transportadora’s midstream asset portfolio has Latin America's most extensive natural gas pipeline network. It generates stable fee-based revenues since its pipeline assets transport more than 60% of the gas consumed in Argentina.
Transportadora has witnessed upward estimate revisions for its 2024 bottom line in the past 60 days. The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at 77 cents and $1.81, respectively. TGS currently has a Growth Score of A and B for Value.
Sunoco is a leading wholesale motor fuel distributor in the United States, boasting a vast distribution network spanning 40 states. With long-term contracts servicing more than 10,000 convenience stores, it distributes more than 10 fuel brands, ensuring a stable revenue stream.
The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $7.29 and $7.17, respectively. The partnership has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days. SUN currently has a Value and Growth Score of A.
GeoPark, based in Hamilton, Bermuda, is an explorer, operator and consolidator in the oil and gas sector. The company primarily operates in Chile, Colombia, Brazil and Argentina. It has a Zacks Style Score of A for Value and B for Growth.
The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $3.23 and $3.98, respectively. The company has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.