BMO Capital analyst Phillip Jungwirth initiated coverage on HF Sinclair Corp (NYSE: DINO) at an Outperform rating with a price target of $65.
The analyst thinks DINO has lagged behind peers during the current refining upcycle and believes in the company’s scale and business diversification.
Jungwirth believes DINO’s premium refining markets offer top-tier margins, and low leverage drives strong capital returns.
The analyst notes the company has undergone significant portfolio transformation in recent years and expects the company’s execution to improve across refining and renewable diesel business. Also, he sees earlier overhangs, such as higher turnarounds, HEP buy-in, and REH Co selling, as diminishing.
Going forward, the analyst expects management to execute against its 50% adjusted net income payout target, driving capital returns of 11% in FY23 and 7% in FY24.
Jungwirth estimates FY23 and FY24 EPS of $9.41 and 6.52, both 6% below consensus and FCF of $1.38 billion in FY23 and $1.21 billion in FY24. The analyst believes the company’s share repurchase program of $1 billion announced in August has helped offset REH selling this year.
Also Read: HF Sinclair Tops Q2 Earnings Estimate; Declares Cash Dividend
Price Action: DINO shares are trading lower by 0.73% at $51.87 on the last check Thursday.
