Merrill Boosts Valero Energy to 'Buy'
Merrill Lynch upgraded Valero Energy (VLO ) to near-term and long-term buy from attractive.
Analyst Andrew Fairbanks says he believes the recent weakness in U.S. refining margins and industry fundamentals are past. He says gasoline inventories erased the dramatic build of May and June, which currently stands at the same level as last year -- below the long-term seasonal average. He thinks Valero will meet 2001 earnings estimates and that 2002 consensus estimates are too low (his 2002 estimates are 37% above the consensus).
Fairbanks says valuation is compelling. Despite the macro downturn, he says refiners are having their best year ever. He sees $7.93 2001 EPS, and $7.50 for 2002. He has a $48 target.
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