Alon USA Energy (ALJ) and Alon USA Partners (ALDW) are surging thanks to a Credit Suisse upgrade, even as refiners like Valero Energy (VLO), Phillips 66 (PSX) and Holly Frontier (HFC) stumble.
Bloomberg News Analyst Edward Westlake and team explain their optimism for the Alon USA pair:
ALDW: Accounting for the revised commodity forecasts (plus support from
the self-help programs that the company is pursuing), our LT EBITDA rises by c4% on average. Granted that there is the possibility that ALDW will not be able to pay out a distribution in 4Q13/1Q14, we flag that for those willing to look past the near-term headwinds, the rolling 12 month forward potential yield starting in 2Q14 is 15% (and rises to c20% by 4Q14) – Certainly hard to overlook at these levels.
ALJ: Accounting for the revised commodity forecasts (plus support from selfhelp
programs), our LT EBITDA rises by c9% on average. ALJ could be worth up to c$15/sh (including the $2.25/sh expected contribution from the Bakersfield start-up – Delivery of this project is key). At current levels, the stock still provides c20% upside in the scenario where Bakersfield does not proceed (or c40% if it does). We raise our rating and target price to Neutral and $14/sh.
Alon USA Energy has gained 11% to $11.34 and Alon USA Partners has risen 5.2% to $11.12, even as Valero Energy has dropped 0.5% to $40.12, Phillips 66 has dipped 0.4% to $65.09 and Holly Frontier has fallen 1.1% to $43.71.
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