Tesoro (TSO) is One 'Refined' Stock: Could Gain on Smart Asset Acquisition, Energy Demand - Barron's
Tweet Send to a FriendGet Alerts TSO Hot Sheet
Up)
Trade TSO Now!
Tesoro Corp. (NYSE: TSO) is higher on the session following a positive outlook in Barron's over the weekend.
Mainly, Barron's was bullish on Tesoro's $1.175 billion acquisition of BP plc's (NYSE: BP) Carson refinery in August. Along with the refinery, Tesoro received gas stations, pipelines, and other assets. By today's valuation, the deal could have been worth $1.5 billion, notable given Tesoro's $5.6 billion valuation.
Tesoro got the unit for a song due to BP being a motivated seller. The refiner should sell pipeline and other infrastructure assets for $1 billion to the Tesoro Logistics partnership
One analyst from Barclays remains bullish, saying Tesoro was undervalued even before the transaction. He sees trough earnings at $5 percent share in the next few years.
To combat recent worries that the downturn in the economy would affect refiners negatively, refiners like Tesoro have moved to return more free cash to investors via institution of a dividend last month. At 48 cents per share, the dividend currently yields 1.2 percent annually. Barclays notes that refiners could easily boost payouts enough for yields close to 4 percent, given robust FCF in the sector.
Bolstering sentiment for refiners is the recent IPO of Norther Tier Energy (NYSE: NTI), which is up 58 percent since its July debut. However, NTI is structured as a limited partnership, which pays out most of its FCF to shareholders. Given the high dividend yield, it's possible that holders of MLPs would look for a richer payout. Tesoro could spin off refineries into smaller MLPs to appease investors, though Barron's notes that that is unlikely to happen.
So, with new BP assets under its belt and energy prices making a nice rebound, dividend and value investors alike would do well to give Tesoro a second look. Shares are up 1 percent on the session.
Join StreetInsider.com FREE and get immediately alerted when news breaks on your stocks and other market items - JOIN NOW
*NEW - Download StreetInsider's FREE iPhone and iPad App - Click Here
Mainly, Barron's was bullish on Tesoro's $1.175 billion acquisition of BP plc's (NYSE: BP) Carson refinery in August. Along with the refinery, Tesoro received gas stations, pipelines, and other assets. By today's valuation, the deal could have been worth $1.5 billion, notable given Tesoro's $5.6 billion valuation.
Tesoro got the unit for a song due to BP being a motivated seller. The refiner should sell pipeline and other infrastructure assets for $1 billion to the Tesoro Logistics partnership
One analyst from Barclays remains bullish, saying Tesoro was undervalued even before the transaction. He sees trough earnings at $5 percent share in the next few years.
To combat recent worries that the downturn in the economy would affect refiners negatively, refiners like Tesoro have moved to return more free cash to investors via institution of a dividend last month. At 48 cents per share, the dividend currently yields 1.2 percent annually. Barclays notes that refiners could easily boost payouts enough for yields close to 4 percent, given robust FCF in the sector.
Bolstering sentiment for refiners is the recent IPO of Norther Tier Energy (NYSE: NTI), which is up 58 percent since its July debut. However, NTI is structured as a limited partnership, which pays out most of its FCF to shareholders. Given the high dividend yield, it's possible that holders of MLPs would look for a richer payout. Tesoro could spin off refineries into smaller MLPs to appease investors, though Barron's notes that that is unlikely to happen.
So, with new BP assets under its belt and energy prices making a nice rebound, dividend and value investors alike would do well to give Tesoro a second look. Shares are up 1 percent on the session.
Join StreetInsider.com FREE and get immediately alerted when news breaks on your stocks and other market items - JOIN NOW
*NEW - Download StreetInsider's FREE iPhone and iPad App - Click Here
You May Also Be Interested In
- UPDATE: Crash in American Electric Power (AEP) & NextEra Energy (NEE) Adds to Jitters
- Best Buy (BBY) Posts Q1 adj.-EPS of 32c; Comps Down 1.1%
- NetApp (NTAP) Tops Q4 EPS by 1c; Boosts Buyback, Plans Job Cuts, Initiates Dividend
Create E-mail Alert Related Categories
Insiders' BlogRelated Entities
Barclays, Barron's, Dividend, Earnings
Login with Facebook
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
