Buoyed by heightened investor interest and a slew of positive developments, we are maintaining our Outperform recommendation on Tesoro Corporation (TSO). The company's decision to resume its dividend payout (and now increase it), along with the announcement of a $500 million share buyback program, make us optimistic about the independent refiner/marketer.
Our positive stance also revolves around Tesoro's proposed acquisition of BP's Southern California refinery, which would boost refinery capacity and improve the company's operational efficiency. An uptick in crack spreads and Tesoro's scale and diversification benefits afforded by its portfolio of seven refineries add to the positive sentiment.
Overall, we believe Tesoro is well positioned going forward and view it as an attractive investment. Our $45 price target is based on a 2013 P/E multiple of 8.4x.
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