2. PBF Energy Inc. (NYSE:PBF)
Stock Upside Potential: 25%
PBF Energy Inc. (NYSE:PBF) is one of the largest independent petroleum refiners and suppliers of unbranded transportation fuels, heating oil, petrochemical feedstocks, lubricants, and other petroleum products in the United States. The company currently owns and operates six domestic oil refineries and related assets with a combined processing capacity of approximately 1 million bpd.
PBF Energy Inc. (NYSE:PBF) posted its third consecutive quarterly loss in Q4 2024, with an adjusted net loss of $2.82 per share. The company’s revenue of $7.35 billion also missed market estimates by $70 million. PBF’s Q4 operating cash flow came in at around $330 million and it ended the year with approximately $536 million in cash and approximately $921 million of net debt. The company remained committed to its shareholders and paid approximately $119 million in dividends in 2024, in addition to repurchasing approximately $330 million of its shares during the year.
PBF Energy Inc. (NYSE:PBF)’s ongoing investment in renewable energy positions it to meet the growing demand for low-carbon fuels. The company announced this month that its St. Bernard Renewables facility produced 17,000 barrels per day of renewable diesel during Q4 2024, up from 13,000 barrels per day in Q3. However, production is expected to fall to 10,000 to 12,000 barrels per day during Q1 2025 as a result of a planned catalyst change in March.
Third Avenue Management, stated the following regarding PBF Energy Inc. (NYSE:PBF) in its Q3 2024 investor letter:
“PBF Energy is a U.S.-listed independent refiner that owns and operates a geographically diversified, high-complexity refining system, with a 1 million barrels per day of capacity. The company closed on a large, unfortunately timed, debt-financed acquisition in February 2020. The COVID pandemic followed immediately thereafter. In response, PBF was forced to cut its dividend and subsequently took actions to reduce its debt position by $3.5bn. Yet, in response to challenging operating conditions at the onset of Covid, capacity closures across the industry led to a 1 million barrel per day reduction of U.S. refining capacity. Reduced capacity contributed to a sharp, industrywide improvement in refining margins as conditions quickly recovered. In addition, the company took in its externally managed, midstream logistics vehicle in 2022 and sold a 50% JV interest in a recently converted renewable diesel facility to Eni in 2023, raising $846mn of proceeds. With a much stronger financial position, the company eventually reinstated its dividend and has spent approximately $1 billion repurchasing 16% of shares outstanding since year-end 2022.
After a significant drawdown in the share price due to a softening near-term outlook, the Fund initiated a position in PBF at a deep discount to our conservative estimate of net asset value, a low multiple to midcycle earnings, and less than one times peak free cash flow. Should operating conditions soften further, PBF’s net cash balance sheet and depressed implied valuation could provide the potential for an asymmetric return profile going forward as the near-term outlook eventually improves, the company returns capital to shareholders, or other corporate developments surface value.”
