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Shares of Western Refining Inc. (WNR - Analyst Report) are trading near their 52-week high of $37.64. In fact, the El Paso, Texas-headquartered independent oil refiner and marketer has seen its stock price climb some 25% since the beginning of the year.

Despite this price appreciation, we remain optimistic on the firm’s near-term prospects, supported by consistency in its earnings/cash flows, attractive fundamentals and a positive outlook. These factors are reflected in Western Refining’s Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months.

Why the Bullishness?

Western Refining is one the largest independent oil refiners in the U.S. with a combined crude oil processing capacity of approximately 151,000 barrels per day. A major advantage for the company is its proprietary access to pipelines, which inhibits lower-cost competitors from supplying Western Refining's key markets.

In particular, Western Refining’s easy access to the lower-priced West Texas Intermediate (WTI) crude gives a cost advantage that is reflected in the company’s high gross margins vis-à-vis its peers.

Western Refining has recently hiked its quarterly dividend payout by 50% to 12 cents per share (48 cents per share annualized). We believe that the hike in dividend not only highlights Western Refining’s commitment to create value for shareholders but also underlines the company’s confidence in its future earnings momentum.

Further, we believe that the company has done a very impressive job at reducing its leverage. Having made debt reduction a priority – which reflects a supportive financial policy – Western Refining management was able to trim total debt by more than $550 million during the last four quarters.

In the near term, the company stands to benefit from its exposure to the profitable Southwest refining assets. Western Refining’s strong retail and wholesale operations strengthen the positive sentiment.

Other Stocks to Consider

In addition to Western Refining, there are certain other downstream operators like Calumet Specialty Products Partners L.P. (CLMT - Snapshot Report), Global Partners L.P. (GLP - Snapshot Report) and NGL Energy Partners L.P. (NGL - Snapshot Report) that offer even greater value and are worth buying now. All these firms sport a Zacks Rank #1 (Strong Buy).

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