Soleil Cuts Q2 Estimates on Tesoro (TSO), Western Refining (WNR); Raises Estimates on Valero (VLO)

June 24, 2008 9:04 AM EDT

Soleil Securities Group is out with a research note this morning adjusting its Q2 earnings estimates for refiners in its coverage universe. The firm notes that its estimates for the refiners are now, on average, about 50% below the First Call consensus.

The firm believes shares of Tesoro (NYSE: TSO) and Western Refining (NYSE: WNR) will continue to see downward pressure, given "lower than expected production volumes and higher costs (natural gas prices are approximately $3/Mcf higher in 2Q08 versus 1Q08)". Soleil lowers its Q2 EPS estimate on Tesoro from $0.70 to $0.10, versus the consensus of $0.69. The firm also reduced its EPS estimate on Western Refining from $0.35 to $0.25, versus the consensus of $0.69, "due to its limited ability to process lower cost crude oils." Soleil maintains a Hold rating on Tesoro and a Sell rating on Western Refining.

At the same time, Soleil made less pessimistic comments on Frontier Oil (NYSE: FTO) and Valero (NYSE: VLO), saying these stocks "are essentially at their 'floor' prices, but do not see a near term catalyst that will improve the outlook for the sector, absent an acquisition." The firm raised its Q2 EPS estimate on Valero from $1.35 to $1.90, versus the consensus of $2.00, related to "widening crude oil differentials." Soleil maintains a Buy on both Frontier and Valero.

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