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On Tuesday, Raymond (NSE:RYMD) James analyst Justin Jenkins revised the price target for Delek US Holdings, Inc. (NYSE:DK) stock, reducing it to $24 from the previous $25, while maintaining an Outperform rating on the shares. The stock, currently trading at $16.54, has experienced significant pressure, falling over 39% in the past year and about 8% in the last week alone. Jenkins highlighted that Delek and other U.S. refiners enjoyed a robust macroeconomic environment during 2022-2023. However, he noted the current macroeconomic conditions have become more challenging.
Jenkins pointed out that Delek has been implementing measures to mitigate the impact of the less favorable economic landscape. These measures include operational improvements, which are progressing despite some isolated issues. According to InvestingPro data, the company operates with a significant debt burden, with a debt-to-equity ratio of 4.36, while maintaining a current ratio of 1.04. The analyst remains optimistic about Delek’s risk/reward balance, citing ongoing efforts in their sum-of-the-parts strategy, which involves retail sales, midstream acquisitions, and contract extensions, as well as the EOP savings initiative.
The analyst believes that despite the potential for continued market volatility, Delek’s stock is trading at a valuation discounted to its fair value. Jenkins suggests that management’s strategic actions aimed at enhancing value could help to close this valuation gap.
In his analysis, Jenkins reiterated his confidence in Delek’s strategic initiatives, emphasizing the company’s potential to improve its market position and financial performance. He maintains that these efforts will support the company’s stock performance going forward.
In other recent news, Delek US Energy Inc reported its fourth-quarter 2024 financial results, revealing a significant earnings miss. The company announced an earnings per share (EPS) of -$2.54, falling short of the projected -$1.89. Revenue also missed expectations, coming in at $2.37 billion compared to the anticipated $2.64 billion. Delek reported a net loss of $414 million for the quarter, highlighting ongoing challenges in the refining margin environment. Despite these financial setbacks, the company is implementing operational improvements and strategic initiatives, such as the Enterprise Optimization Plan, to enhance future performance. Analysts and investors showed interest in the company’s focus on cash flow improvement and strategic deconsolidation of Delek Logistics (NYSE:DKL). The company has set a capital outlook for 2025 of $150 million to $170 million and anticipates no major turnarounds in that year. Additionally, Delek’s management emphasized the importance of sustainable and market-agnostic projects in its future strategy.
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