Is it time to get back into the refiners? HollyFrontier Corporation saw product crack spreads narrow in the fourth quarter but they're still historically favorable. This Zacks #2 Rank (Buy) is still dirt cheap, with a forward P/E of just 7.1.
HollyFrontier is an independent oil refiner that produces gasoline, diesel fuel, and jet fuel.
It operates 5 refineries and sells its refined products principally in the Southwest U.S., the Rocky Mountains, the Pacific Northwest and other nearby Plains states.
2012 Zacks Consensus Estimates Rise
The company is upbeat about 2012.
"Looking forward, the differentials between inland and coastal crudes are fairly robust, which should contribute favorably to our first quarter results. Further, we believe that operational synergies and increased asset scale gained during the merger will help us to extend our record of providing consistent returns and increasing shareholder value while maintaining a strong balance sheet," said Mike Jennings, CEO on Feb 28.
In the last 30 days, analysts have gotten more bullish about HollyFrontier's 2012 prospects.
The 2012 Zacks Consensus Estimate has risen to $4.93 from $4.15 per share in that time with 10 estimates out of 13 moving higher and just 1 going lower.
However, that is still 25% below last year's earnings of $6.54 which included record crack spreads. HollyFrontier is also competing against a high standard as 2011 was the most profitable in the company's history.
Still Very Cheap
Shares sold off in late 2011 when investors freaked out about the drop in crack spreads. But shares have staged a big rally in 2012.
But HollyFrontier is still a cheap stock. In addition to a single digit P/E, the company has a price-to-book ratio of just 1.3.
A P/B under 3.0 usually indicates there is value.
It also has a low price-to-sales ratio, which is another indicator of value. HollyFrontier has a P/S ratio of just 0.5. A P/S ratio under 1.0 can mean a company is undervalued.
HollyFrontier is still an attractive value play, even with the fall in earnings. Shareholders are also rewarded with a dividend, yielding 1.1%.
This Week's Value Zacks Rank Buy Stocks
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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her on twitter at @TraceyRyniec.