Yahoo Finance Behind Tesoro’s Stock Performance after Its 1Q16 Earnings Release
A Closer Look at Tesoro's 1Q16 Plunge in Refining Earnings
Tesoro’s stock performance
Tesoro Corporation (TSO) announced its results on May 4, 2016, after market hours. TSO opened the day at $78.3 per share, just below the previous close of $78.7. Tesoro saw highs of $79.3 and lows of $75.9 during the day and eventually closed at $76.8—around 2.4% lower than its previous day’s close but in line with peers.
On May 4, 2016, TSO’s peers Alon USA Energy (ALJ), Marathon Petroleum (MPC), and Valero Energy (VLO) fell by 2.8%, 4.7%, and 2.6%, respectively. For exposure to refining sector stocks, investors can consider the Vanguard Energy ETF (VDE), which has ~10% exposure to the sector.
Tesoro’s capex and management comment
In 1Q16, Tesoro incurred capital expenditure, or capex, of $188 million, including Tesoro Logistics LP (TLLP). For 2016, Tesoro has cut its capex guidance by ~$500 million to ~$1 billion, of which ~$300 million is for TLLP. The reduction in capex is due to steep fall in commodity prices. Several of TLLP’s gathering projects have also been deferred. Tesoro closed the acquisition of the Great Northern Midstream, which has vast logistics assets in the Williston Basin of North Dakota.
For 2016, Tesoro expects the refining index to be within the range of $12–$14 per barrel. Tesoro expects business improvements of $500 million–$600 million on a yearly basis due to higher utilizations and operational efficiencies. The company also expects $400 million–$500 million of improvements in its Logistics segment.
TSO’s management stated the following: “Our highly integrated business model allowed us to deliver adjusted earnings growth versus last year in spite of narrow crude oil differentials during the quarter and a weak refining margin environment in February…consumer demand for gasoline remains strong and refining margins improved as the quarter ended, which benefits our outlook for the second quarter.”
In the next and final part of this series, we’ll look at analyst recommendations for Tesoro.
Browse this series on Market Realist:
