Shares of Alon USA Energy Inc. (NYSE: ALJ), an independent refiner and marketer of petroleum products operating mainly in the South Central, Southwestern and Western regions of the U.S., are soaring in trading today after Goldman Sachs initiated coverage on the stock with a “Buy” rating.
Analysts at Goldman Sachs have set a price target of $21 on ALJ. In the research note, Goldman Sachs analysts said that ALJ is geographically diversified refining company, though its Big Spring refinery accounts for the bulk of its expected valuation and benefits from Brent-WTI and WTI-Midland versus WTI-Cushing crude oil spreads. The analysts said that they believe the recent IPO of Alon USA Partners, a variable distribution MLP that houses ALJ’s membership interest in the Big Spring refinery, will help investors recognize the inherent value of the asset.
ALJ shares are currently trading 17.83% higher at $17.84 on above average volume of 1.13 million. The stock hit a 52-week high of $18.06 in trading today.
ALJ shares have gained more than 104% this year, outperforming the broad market.
Alon USA reported its most recent quarterly results (Q3) in November. For the third quarter of 2012, the Dallas, Texas-based company reported net income of $43.2 million, or $0.76 per share, compared to net income of $28.6 million, or $0.51 per share reported for the same period in the previous year. Excluding one-time items, the company reported net income of $47.6 million, or $0.84 per share for the third quarter of 2012, compared to adjusted net income of $39 million, or $0.70 per share reported for the same period in the previous year.
Paul Elisman, President and CEO of Alon USA Energy, said that during the third quarter, the company generated over $100 million of cash flow from operating activities, which was used to reduce total debt by $75 million.