On Monday, JPMorgan (NYSE:JPM) reiterated its Overweight rating on PBF Energy (NYSE:PBF) with a steady stock price target of $59.00. The firm's analysis suggests that PBF Energy is well-positioned within the refining sector, with first-quarter earnings per share (EPS) maintained at $0.65, in contrast to the consensus estimate of $0.57.
The forecast for refining operating income stands at $125 million, with crude throughput expected to be around the midpoint of the company's first-quarter guidance range of 830-890 thousand barrels per day (kbd).
The anticipated consolidated gross margin for PBF Energy is approximately $11.75 per barrel, showing an increase from the fourth quarter's $9.88 per barrel. This improvement is attributed to higher industry-wide cracks, with the exception of the East Coast, and increased captures in the Mid-Continent and West Coast regions. Still, the East Coast and Gulf Coast are expected to experience lower captures due to turnaround and other factors.
Operating expenses for refining are projected to rise to $8.50 per barrel in the first quarter, up from $7.98 per barrel in the previous quarter, mainly due to seasonally higher natural gas usage. Earnings in the Logistics segment are forecasted to remain flat, and earnings from the SBR RD joint venture are expected to break even.
JPMorgan's model anticipates $178 million in first-quarter cash flow from operations, accounting for a $65 million working capital headwind from an assumed partial paydown of the short Renewable Identification Number (RIN) position.
Capital expenditures are estimated at $208 million, lower than the $233 million in the fourth quarter, with free cash flow predicted to be negative $30 million. The firm also projects $100 million in share buybacks and an ending net debt of negative $378 million, with approximately $1.624 billion in ending cash.
PBF Energy is recognized for its significant leverage to refining fundamentals and a more defensive screening than in the past, following a substantial deleveraging effort after the COVID-19 lows. The company's sale of half of its SBR RD project for approximately $850 million, after constructing the facility for about $650 million, has provided it with a unique negative cost basis compared to other refiners.
Despite future outflows related to the SBR build, a buyout of the inventory intermediation agreement, minimal earnout payments on the Martinez acquisition, and environmental liabilities, particularly around RINs, JPMorgan believes that the market has yet to fully acknowledge the improved balance sheet.
The firm anticipates that investor confidence in the balance sheet will strengthen in subsequent quarters as future accrual paydowns become less significant to PBF Energy's financial narrative.
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