On Wednesday, TD Cowen adjusted its outlook on Delek US Holdings Inc (NYSE:DK), a downstream energy company. The firm lowered its price target on the stock to $25.00 from the previous $27.00. Despite this change, the analyst kept a Hold rating on the shares.
The decision to revise the price target downward came after considering the company's ongoing value unlock process. Delek US has been engaged in this process for approximately 1.5 years, aiming to restructure and enhance shareholder value. However, the analyst noted that the company has provided limited additional details on the progress of this initiative and has yet to deliver any significant restructuring results.
The analyst's skepticism extends to Delek US's financial performance, particularly concerning its Supply line item. This specific line has underperformed, posting negative results in four out of the past five quarters, consistently falling below the company's own guidance. As a result, the analyst has chosen to discount the company's guidance in their forecasts.
Furthermore, the analyst expressed concerns regarding Delek US's financial projections, pointing out that the company's provided mid-cycle Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) suggests there will be limited free cash flow (FCF) available. This assessment underpins the decision to maintain the Hold rating, indicating a cautious stance on the stock's potential for near-term growth.
InvestingPro Insights
As Delek US Holdings Inc (NYSE:DK) navigates its restructuring efforts, real-time data from InvestingPro offers insights into the company's financial health and market valuation. With a market capitalization of $1.8 billion, the company's negative P/E ratio of -23.68 reflects its recent lack of profitability. However, the InvestingPro Tips suggest a potential turnaround, with net income expected to grow this year and two analysts revising their earnings upwards for the upcoming period. These revisions may signal growing confidence in the company's ability to improve its bottom line.
Despite the anticipated sales decline in the current year, the company is trading at a relatively low revenue valuation multiple, which could attract investors looking for undervalued opportunities. Moreover, analysts predict Delek US will be profitable this year, which could be a pivotal factor for future stock performance. Yet, investors should note the weak gross profit margins of 5.79%, as this could impact the company's ability to generate strong earnings.
For those interested in a deeper analysis, there are additional InvestingPro Tips available that could provide further guidance on Delek US Holdings Inc's prospects. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription to access these valuable insights.
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