UBS cuts PBF Energy stock price target to $23 from $26

On Tuesday, UBS analysts, led by Manav Gupta, revised the price target for PBF Energy (NYSE:PBF) shares, reducing it to $23.00 from the previous $26.00. The firm maintained a Neutral rating on the stock. Currently trading at $19.20, near its 52-week low of $18.97, InvestingPro analysis suggests PBF Energy is undervalued. The adjustment comes as UBS expects increased operating expenses due to downtime at the Martinez facility, which is anticipated to impact the company’s financials negatively. This outlook aligns with recent trends, as eight analysts have revised their earnings estimates downward for the upcoming period.

Gupta noted that the first quarter of 2025 earnings per share (EPS) estimate for PBF Energy has been adjusted to a loss of $3.36, a significant decrease from the prior estimate of a $1.30 loss, and more pessimistic than the Street’s expectation of a $1.78 loss. The company’s financial health metrics from InvestingPro show concerning trends, with negative EBITDA of $234.2 million and a gross profit margin of just 1.11%. The revised forecast is based on the belief that the Martinez downtime will elevate operating expenses and affect the company’s profit capture.

Additionally, UBS has also lowered its projections for PBF Energy’s performance in 2026 and 2027, reflecting a weaker environment for refining margins, commonly referred to as cracks. The firm expects PBF Energy to report an adjusted EBITDA loss of $304 million for the first quarter of 2025, which is substantially more than the Street’s consensus of a $90 million loss.

The report also highlights changes in the Gulf Coast RIN adjusted crack, a valuation indicator for Valero Energy (NYSE:VLO), which has increased by $1.60 per barrel quarter over quarter. Similarly, the Mid-Con, North Atlantic, and West Coast RIN adjusted cracks have also shown increases quarter over quarter.

UBS anticipates that PBF Energy will not engage in share buybacks during the first quarter of 2025. Capital expenditures are projected to be around $290 million, and working capital is expected to present a $300 million headwind for the quarter. Furthermore, the firm forecasts a substantial pre-dividend cash burn of $800 million for PBF Energy in the first quarter. Despite these challenges, the company maintains a dividend yield of 5.59%. InvestingPro subscribers can access 14 additional key insights about PBF Energy’s financial health and future prospects through the comprehensive Pro Research Report.

Lastly, UBS expects PBF Energy to report a loss in its Refining & Distribution (RD) segment for the first quarter of 2025, although specific figures were not provided. The combination of these factors has led to the reduced price target for PBF Energy shares.

In other recent news, PBF Energy has announced plans to offer $750 million in senior notes through its subsidiary, PBF Holding Company LLC. The proceeds from this offering aim to reduce debt under its revolving credit facility and fund general corporate purposes. Fitch Ratings recently revised the outlook for PBF Holding from stable to negative, highlighting increased structural gross debt and potential liquidity strains. Despite these concerns, Fitch affirmed the company’s Long-Term Issuer Default Rating at ’BB’ and noted that PBF Holding’s obligations related to Renewable Identification Numbers (RINs) and California’s cap-and-trade program are manageable in the near term.

Additionally, PBF Energy plans to restart its Martinez, California refinery in stages after a fire halted operations in February 2025. The company expects the refinery to be fully operational by the fourth quarter of 2025, with insurance expected to cover most repair costs. Meanwhile, analysts at JPMorgan and TD Cowen have adjusted their price targets for PBF Energy, with JPMorgan lowering its target to $31 and maintaining a Neutral rating, while TD Cowen reduced its target to $19 with a Sell rating. These adjustments reflect concerns over the Martinez refinery’s shutdown and its impact on the company’s financials.

PBF Energy’s fourth-quarter results were negatively affected by a weak crack environment, with operational issues further pressuring shares. The company’s focus on capital allocation has shifted toward improving its balance sheet, with management prioritizing debt reduction over shareholder returns. Analysts have noted the potential financial repercussions if the Martinez refinery remains closed for an extended period, emphasizing the importance of monitoring the situation closely.

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