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 PBF Energy Inc. (NYSE:PBF) 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.

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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).

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.”

Overall, PBF ranks 2nd on our list of best oil refinery stocks to invest in according to analysts. While we acknowledge the potential for PBF 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 PBF 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.