Here’s why the Hold strategy is right for PBF Energy right now

PBF Energy (NYSE:PBF) has seen its earnings estimates for 2024 and 2025 revised upwards over the last 60 days.

Shares of the company, currently rated by a Zacks Rank #3 (Hold), have gained 10.4% over the past six months, while stocks in its industry have gained 6.4%.

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Factors affecting stocks

Favorable style result

PBF Energy has an impressive Value Score of A. The Value Score helps you find stocks that are undervalued. Back-testing results have shown that stocks with a favorable Value Score and a solid Zacks Rank are the best investment bets.

Impressive Profits Surprise History

PBF Energy’s net profit topped estimates in three of the last four quarters and missed them once.

Strong cash position

PBF’s balance sheet is supported by a significant cash reserve of $1.4 billion as of March 31, 2024. This strong liquidity position allows the company to navigate market volatility and invest in growth opportunities without compromising financial stability. Additionally, the company has $1.2 billion of total debt, indicating a healthy net cash position that provides a buffer against economic uncertainty and supports strategic initiatives.

Consistent profits for shareholders

PBF Energy has demonstrated a commitment to returning value to shareholders through dividends and share repurchases. In the first quarter of 2024, the company declared a quarterly dividend of $0.25 per share, an increase from prior quarters, and repurchased 2.6 million shares for approximately $125 million. This approach not only signals confidence in the financial health of the company, but also increases shareholder value by reducing the number of shares outstanding.

Renewable energy initiatives

The company’s strategic diversification into renewable fuels positions it well for growth in the energy transition landscape. The St. Bernard Renewables (“SBR”) venture, a 50-50 partnership with Eni, has begun production of renewable diesel with an annual capacity of approximately 320 million gallons. This initiative not only aligns with global sustainability trends, but also provides PBF with a new revenue stream and the potential for significant carbon credit generation, increasing overall profitability and sustainability.

Key Business Drivers

PBF Energy’s diverse asset base in key refining regions across the United States provides a competitive advantage. The company operates highly complex refineries with combined throughput of more than 1 million barrels per day on the East Coast, Gulf Coast, Midcontinent and West Coast. This geographic diversification allows the company to optimize operations and achieve margin improvements in various markets, mitigating regional market risks.

PBF Energy’s disciplined capital allocation strategy is focused on long-term value creation. The company plans to invest $800-850 million in refining capital expenditures in 2024, with the goal of increasing operational efficiency and processing capacity. This investment includes significant planned maintenance activities to ensure refinery reliability and safety, positioning the company to capitalize on market opportunities as demand for refined products remains strong.

The refining industry is currently experiencing favorable market dynamics, with resilient demand for refined products and tight global inventory levels. PBF Energy is benefiting from this environment as reduced refining capacity in the United States and sustained demand support strong refining margins. This market backdrop provides a favorable environment for PBF to generate solid cash flow and maintain profitability.

PBF Energy is advancing its environmental, social and governance (ESG) initiatives by developing clean energy projects, including the MACH2 clean hydrogen center on the East Coast. The project aims to produce green hydrogen and develop related infrastructure, supported by up to $750 million from the Department of Energy. Such initiatives not only strengthen PBF’s ESG credentials, but also position the company as a leader in the transition to a low-carbon economy, potentially attracting ESG-focused investors.

The company demonstrated effective cost management and operational efficiency, with operating expenses in the first quarter of 2024 decreasing compared to the same period in 2023. The focus on cost control combined with strategic investments in margin improvement projects ensures that PBF can maintain competitive operational efficiency and profitability even in challenging market conditions.

Actions to consider

Investors interested in the energy sector can look at better-rated stocks such as Transporter (NYSE:TGS), Sunoco LP (NYSE:SUN) and GeoPark Sp. (NYSE:GPRK), each currently sporting a Zacks Rating of #1 (Strong Buy).

Transportadora’s midstream portfolio includes the most extensive gas pipeline network in Latin America. It generates stable fee-based revenues as its pipeline assets transport more than 60% of the gas consumed in Argentina.

Transportadora has seen upward revisions to its 2024 earnings estimates over the past 60 days. The Zacks Consensus Estimate for 2024 and 2025 is 77 cents and $1.81, respectively. TGS currently has a Growth Score of A and B for Value.

Sunoco is a leading wholesale distributor of motor fuels in the United States, boasting an extensive distribution network spanning 40 states. Through long-term contracts serving more than 10,000 convenience stores, it distributes more than 10 fuel brands, providing a stable revenue stream.

The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is $7.29 and $7.17, respectively. Over the past 30 days, the partnership has seen upward earnings estimate revisions for both 2024 and 2025. SUN currently has a Value and Growth Score of A.

GeoPark, headquartered in Hamilton, Bermuda, is an exploration, operator, and consolidation company in the oil and gas sector. The company operates primarily in Chile, Colombia, Brazil, and Argentina. It has a Zacks Style Score of A for Value and B for Growth.

The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is $3.23 and $3.98, respectively. Over the past 60 days, the company has witnessed upward earnings estimate revisions for both 2024 and 2025.

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