We recently published a list of 12 Best Oil Refinery Stocks To Invest In According to Analysts. In this article, we are going to take a look at where HF Sinclair Corporation (NYSE:DINO) stands against other best oil refinery stocks to invest in according to analysts.

The United States of America is the Largest Oil Producing Country in the World with current production reaching record levels, so it doesn’t come as a surprise that it is also counted among the Countries with the Largest Refining Capacities. The US had 132 oil refineries with a total capacity of 18.4 million barrels per day (bpd) at the start of 2024, a 2% increase compared with the start of 2023.

READ ALSO: 11 Best Natural Gas Stocks to Buy Now

2024 was a difficult year for the global refining sector as industry players faced a drop in profitability to multi-year lows amid soft consumer and industrial demand (especially in China), slowing economic growth, increasing energy transition, and expanding global refining capacity. The declining fuel margins in the Q4 2024 led to disappointing earnings results for many oil refiners, as a flood of new output competed with stagnating demand. This has led to several oil majors shutting down operations and putting their refineries up for sale, but that is also not going as smoothly as expected.

Things don’t seem to be getting any better either as according to the International Energy Agency’s recent market outlook, growth in the global demand for oil is expected to slow down in the coming years as energy transitions advance, putting downward pressure on prices. The US Energy Information Administration stated last month that it expects Brent crude oil prices to fall 8% to average $74 a barrel in 2025, then fall further to $66 a barrel in 2026, further reducing margins for refiners.

Moreover, despite his repeated calls to ramp up oil production in the country, President Donald Trump’s tariffs on imports from Mexico and Canada could make things worse for the refining sector. Many refineries in the Midwest depend on Canadian crude and the upcoming 10% tariff will force them to pay either more for their feedstock, or slash production, further squeezing an industry already in decline. The President wants to make America self-sufficient and independent when it comes to energy, but no matter how much oil the United States pumps, its refineries were designed to process the darker, denser, cheaper crude that is hard to find domestically. However, Trump’s plans to roll back support for electric vehicles and charging stations could slow their sales and bolster gasoline demand, offering some respite to the industry.

The rapid energy transition is also a major cause of concern for the refining sector as governments push drivers toward electric vehicles in pursuit of climate goals. So the only way forward is for the industry to adapt and evolve. Several forward-looking refiners are now boosting their resilience by upgrading their facilities to produce higher-value but lower-carbon products such as petrochemicals and renewable fuels, though it will require significant capital investment.

The energy sector has witnessed considerable fluctuations over the last few months, surging by over 6% in November before declining around 10% in December. However, the broader energy sector ended last year with a return of just 5.72%, significantly lagging behind gains of 25% by the wider market. Nevertheless, the sector’s performance over the past 3-year and 5-year periods remains strong.

Methodology

To collect data for this article, we examined all the companies in the oil refining sector that are listed on NASDAQ and NYSE and then compiled a list of the stocks with the highest upside potential according to Wall Street analysts, as of February 18, 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

HF Sinclair Corporation (NYSE:DINO)

Stock Upside Potential: 21.6%

HF Sinclair Corporation (NYSE:DINO) is an independent petroleum refiner in the United States with operations throughout the mid-continent, southwestern, and Rocky Mountain regions. The company operates seven complex refineries with an annual average crude oil capacity of approximately 678,000 barrels per day.

HF Sinclair Corporation (NYSE:DINO) reported EPS of $0.51 in Q3 of 2024, beating analysts’ estimates by $0.18, as higher fuel sales and a strong midstream segment offset a margin slump, particularly in the West and Mid-Continent regions. The company continued to prove its reliability in the refining business and completed the turnaround at its Parker refinery on time and on budget in Q3, in addition to setting a quarterly record for premium production at its Woods Cross refinery. Due to reduced turnaround activities, HF Sinclair’s refinery utilization averaged 101.2% during the quarter, compared with 88.8% in the same period of 2023, leading to a 3.2% YoY increase in refined product sales. The company returned $222 million in cash to its shareholders in Q3 and also announced a quarterly dividend of $0.50 per share, demonstrating its continued commitment to shareholder returns.

The refining industry faced a challenging macro environment in 2024, leading the stock of HF Sinclair Corporation (NYSE:DINO) to plunge by more than 36% over the last year. Longleaf Partners, managed by Southeastern Asset Management, stated the following regarding HF Sinclair Corporation (NYSE:DINO) in its Q4 2024 investor letter:

“HF Sinclair Corporation (NYSE:DINO) – Energy infrastructure company HF Sinclair, which owns refining, midstream, specialty chemicals, marketing and renewable fuels assets, detracted in the quarter and for the year. The company owns unique assets that are protected from competition and has a great culture focused on value per share growth and realization. We had the opportunity to purchase this strong company in the quarter due to the recent refining downcycle and oil price volatility. We know HF Sinclair well having owned it before in 2015 in the Small-Cap Fund and having followed it since we first visited the company in 2009. As is typical in this industry, quarterly volatility in spread pricing can weigh on the share price in the short term, which is what happened this quarter. We were encouraged to see significant insider buying throughout the quarter as we were buying alongside them.”

Overall, DINO ranks 3rd on our list of best oil refinery stocks to invest in according to analysts. While we acknowledge the potential for DINO to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DINO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.