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On Friday, Mizuho (NYSE:MFG) Securities adjusted its outlook on Par Pacific Holdings (NYSE:PARR), reducing the price target from $22.00 to $18.00, while maintaining a Neutral rating on the company's shares. The adjustment follows Mizuho's anticipation of Par Pacific's first-quarter earnings falling short of consensus expectations, with projected declines in EBITDA and EPS by 59% and 55%, respectively. Currently trading at $13.65, the stock sits well below analyst targets ranging from $15 to $25, with the company scheduled to report earnings on April 30. InvestingPro analysis suggests the stock may be undervalued at current levels.
The anticipated shortfall is attributed to weaker performance in the Refining segment, which did not fully benefit from quarter-over-quarter improvements due to higher indicator margins. These gains were reportedly negated by downturns in the Logistics and Retail divisions, influenced by the Refining sector's challenges, including a shutdown in Wyoming and seasonal effects. With a significant debt burden and weak gross profit margins of 10.95%, the company faces operational headwinds, though InvestingPro data shows liquid assets exceed short-term obligations with a current ratio of 1.62.
Mizuho analysts pointed out that the gradual recovery in crack spreads has been undermined by reduced capture rates, which may be affected by the Wyoming shutdown in the first quarter and a scheduled turnaround in Montana during the second quarter. They also noted that while the upcoming paving season could lead to high asphalt margins, the narrower Western Canadian Select (WCS) differentials are expected to pose a significant challenge for the second quarter.
The revised price target of $18 per share is based on a net asset value approach, taking into account lowered crack spread estimates in the near term. Mizuho's report reiterates a Neutral stance on Par Pacific stock, citing the overall weakness in the refining sub-sector and the prevailing uncertainty surrounding global economic growth. Despite current challenges, analysts predict profitability this year, with an EPS forecast of $0.67 for FY2025. For deeper insights into Par Pacific's valuation and prospects, including 8 additional ProTips and comprehensive financial analysis, visit InvestingPro.
In other recent news, Par Pacific Holdings reported mixed results for the fourth quarter of 2024. The company posted an adjusted loss of $0.79 per share, missing analyst expectations of a $0.45 loss. However, revenue surpassed projections, reaching $1.83 billion compared to the expected $1.76 billion. Notably, the logistics segment achieved record EBITDA, while the refining segment faced challenges. In a separate development, Goldman Sachs upgraded Par Pacific's stock rating from Neutral to Buy, raising the price target to $19 from $18. The firm cited a favorable risk/reward scenario and potential improvements in Par Pacific's Hawaii refining segment. These developments come amid Par Pacific's strategic focus on projects like a sustainable aviation fuel initiative and cost reduction efforts. Investors will be watching closely to see if the company's performance aligns with these optimistic outlooks.
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