Murphy USA (MUSA): RIN Bear Case Scenario Means Upside From Here Not Downside - Jefferies
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Jefferies analyst, Christopher Mandeville, reiterated his Buy rating on shares of Murphy USA (NYSE: MUSA) after post-election volatility caused shares to drop ~10% on fears of a material change to the RFS mandate before recovering.
The analyst believes this temporary stock shock does show that the market is overestimating MUSA's financial impact under a bear case scenario (RINS = $0). The analyst believes that due to investors' preference to apply a lower multiple to RIN income (he uses 4x EV/ EBITDA vs. 8.5x for Retail/PS&W) and assuming only a 1.3c/gallon contribution from PS&W, 2012 levels when RINs were less than a nickel, the analyst arrives at a bear case of $67/share. This is well below the $85 price target but above current levels.
No change to the price target of $85.
Shares of Murphy USA closed at $63.40 yesterday.
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