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Bull of the Day: PBF Energy Inc. (PBF)

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PBF Energy (PBF - Free Report) , a Zacks Rank #1 (Strong Buy), has been a substantial beneficiary of higher commodity prices over the past year. PBF had been steadily outperforming the market before pulling back along with the energy sector over the past month. With oil looking to stabilize in the short-term, along with hints from the Fed regarding the potential for slower rate hikes in the future, energy stocks such as PBF are looking to begin the next leg up. The retreat in price over the past few weeks presents investors with a solid buying opportunity.

PBF sports the highest Zacks Growth and Value Style Scores of ‘A’. The company is part of the Zacks Oil and Gas – Refining and Marketing industry group, which ranks in the top 2% out of more than 250 Zacks Ranked Industries. This group has widely outperformed the market this year, advancing more than 26% while the S&P 500 is in a deep correction. Also note the favorable metrics for this industry group below:

Zacks Investment Research
Image Source: Zacks Investment Research

Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.

Company Description

PBF Energy is a leading refiner that produces gasoline, diesel, heating oil, jet fuel, and petrochemicals. The company sells its products in the United States, Canada, and Mexico. PBF also provides rail, truck, and marine transportation services. PBF Energy was founded in 2008 and is headquartered in Parsippany, NJ.

Earnings Trends and Future Estimates

PBF has surpassed earnings estimates in each of the past four quarters. The refiner reported Q2 EPS just yesterday of $10.58/share, a 43.75% surprise over the $7.36 consensus estimate. PBF has delivered a trailing four-quarter average earnings surprise of 77.97%.

Analysts are in agreement in terms of earnings revisions and have increased their estimates across the board.  For the third quarter, analysts covering PBF have increased their estimates by 123.03% in the past 60 days. The Q3 Zacks Consensus EPS estimate now stands at $3.68, translating to a staggering potential growth rate of 2,966.67% relative to the same quarter last year.

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Image Source: Zacks Investment Research

For the full year, analysts have bumped up their earnings projections by 164.11% in the past 60 days. The 2022 Zacks Consensus EPS Estimate is now $12.73, reflecting anticipated growth of 609.2% relative to last year. Revenues are expected to climb 39.36% to $37.98 billion. Clearly, the growth is there for PBF investors.

Stock Performance & Valuation

PBF shares have advanced over 230% in the past year. Only stocks that are in extremely powerful uptrends are able to make this type of price move while the major indices are in a correction. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions. Shares have advanced over 140% this year alone.

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Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. And as we know, PBF Energy has recently witnessed positive revisions. As long as this trend remains intact (and PBF continues to deliver earnings beats), the stock will likely continue its bullish run this year. Cautious investors may feel hesitant about investing in a stock that has come this far, but the fact is this elite company is still outperforming.

Despite the impressive performance, PBF remains relatively undervalued, irrespective of the metric used:

Zacks Investment Research
Image Source: Zacks Investment Research

Bottom Line

Solid institutional buying should continue to provide a tailwind for the stock price. PBF is ranked favorably by our Style Score Categories with an ‘A’ for Value and ‘A’ for Growth, paving the way for an overall ‘A’ VGM score. This indicates that there’s a strong likelihood that PBF’s outperformance will continue on the heels of strong sales and earnings growth.

Robust fundamentals combined with a strong technical trend certainly justify adding shares to the mix. Backed by a leading industry group and robust history of earnings beats, it’s not difficult to see why this company is a compelling investment. This market winner continues to prove its doubters wrong, and investors would be wise to consider PBF as a portfolio candidate if they haven’t already done so.

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