Barclays Reiterates an 'Overweight' on Tesoro (TSO); Investor Day Update

Barclays reiterates an 'Overweight' on Tesoro Corporation (NYSE: TSO) price target of $46.00.

Barclays analyst says, "Yesterday (12/5/11), TSO hosted an Investor Day event at the New York Stock Exchange announcing capex guidance and project updates. Although the company has demonstrated good operating performance through 2011, we think the shares will come under near-term pressure in light of the higher than expected capex spending ($970 mm total including turnaround activity vs. our previous estimate of $875 mm), challenging regulatory environment, and uncertain West Coast margin outlook. Incremental EBITDA contribution from income capital projects in the later years mark a major slowdown compared to the near-term..."

"Despite the lack of real surprises and the market's anticipation of more optimistic guidance, we think the investors could overact to the news and overlook the company's impressive and consistent margin capture rate, strong earnings power, as well as inexpensive valuation. Based on our analysis using a Brent/WTI spread assumption of $5/bl and a California indicator margin of $8/bl, we estimate TSO's annual earnings power at $3.5/share, not including the full benefits of the company's ajor projects. This type of earnings level should support a share price of $41-51, or $46 at the mid-point. On price/tangible book and EV/daily barrel of complexity, TSO is also valued attractively compared to peers."

For an analyst ratings summary and ratings history on Tesoro Corporation click here. For more ratings news on Tesoro Corporation click here.

Shares of Tesoro Corporation closed at $23.31 yesterday.

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