Western Refining, which operates as an independent crude oil refiner and marketer of refined products, owns two of the highest margin refineries in the U.S, in El Paso, TX, and Gallup, NM, the firm said.
These "solid assets" have access to local captive crude supplies in the Permian and Four Corners regions, analysts stated.
However, the company is being pulled in two directions on strategy: Buy the remaining 62% of Northern Tier Energy (NTI, or sell its refineries to it, the firm stated.
Analysts prefer that Western Refining buy the rest of Northern Tier Energy as they see its assets as "significantly undervalued as a result of its structure and dependence on one asset," according to the analyst note.
On Wednesday, shares slumped 4.15% to $44.37.
Separately, TheStreet Ratings team rates WESTERN REFINING INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate WESTERN REFINING INC (WNR) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income, notable return on equity, attractive valuation levels and good cash flow from operations. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 23.9% when compared to the same quarter one year prior, going from $85.55 million to $105.99 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, WESTERN REFINING INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has significantly increased by 63.94% to $104.98 million when compared to the same quarter last year. In addition, WESTERN REFINING INC has also vastly surpassed the industry average cash flow growth rate of -53.24%.
- You can view the full analysis from the report here: WNR Ratings Report