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CVR Refining Slips to Strong Sell

Zacks Equity Research

Zacks Investment Research downgraded CVR Refining, LP (CVRR) to a Zacks #5 Rank (Strong Sell) on Oct 5.

Why the Downgrade?

CVR Refining has witnessed sharp downward estimate revisions after reporting disappointing second-quarter 2013 results. Shares of this independent downstream energy limited partnership have been on a downtrend since the beginning of August and has more downside left.

Earlier second-quarter earnings were partially aided by reduction in a 6.9% increase in sales, selling, general & administrative expenses (down 16.2% year over year) and interest expense (down 34.4%). However, these positives were more than offset by a 6.6% increase in depreciation and amortization as well as a 3.4% increase in direct operating expense, on a year over year basis.

Though CVR Refining’s capital ratios remained strong and exceed all regulatory requirements, credit quality showed deterioration with net charge offs increasing 13 basis points (bps) year over year to 0.22% and the allowance for loan losses increasing 39 bps to 1.50% of total loans as of Sep 30, 2012.  

The Zacks Consensus Estimate for 2014 decreased 17.3% year-over-year to $3.99 per share. For 2014, most of the estimates were revised downward over the last 60 days, sinking the Zacks Consensus Estimate by 21.2% to $4.57 per share.

Other Stocks to Consider

Not all oil stocks are performing as poorly as CVR Refining. Other stocks to watch out for in the industry are Pioneer Energy Services Corp. (PES), TransGlobe Energy Corp. (TGA)  and Enbridge Energy Management LLC (EEQ), each with a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on CVRR
Read the Full Research Report on EEQ
Read the Full Research Report on TGA
Read the Full Research Report on PES

Zacks Investment Research