UPDATE: Here's the prospectus for the offering, which could reach $350 million if its greenshoe is exercised. In addition, Delek US will buy back another 1 million shares from its top investor under the umbrella of a new buyback program. The moves will lower Delek Group's stake to about 39 percent, meaning Delek US' board is having to set up some new committees. As of 12:45 p.m., Delek US shares have regained some ground and are off almost 3 percent.
As originally reported:
There's no official word yet, but an Israeli news outlet is reporting that the largest shareholder of Delek US Holdings plans to sell a big part of its stake. That knocked down the high-flying shares of Delek US (Ticker: DK) by more than 5 percent before regulators halted trading at about 10:20 a.m. Central. The news that Delek Group — which has been steadily unloading chunks of Delek US at their record highs — will market $250 million worth of its Delek US stock outweighed two analysts price target hikes. Both Blake Fernandez at Howard Weil ($38 from $32) and Paul Cheng at Barclays ($47 from $40) see the Brentwood-based company pushing higher.
Shares of Delek US Holdings (Ticker: DK) are up more than 40 percent so far in 2013 and more than 170 percent over the past 12 months. And while they took a bit of a breather of late, Jack Hough at Barron's over the weekend wrote that the oil refiners active in the center of the country will continue to benefit from the difference between what they pay for the West Texas Intermediate crude and what consumers are paying for refined products, which are based more on the price of Brent oil. That dynamic is expected to be a temporary one — even though it's persisted for a good while — and one analyst says that is creating a virtuous cycle of sorts.
Belief that the refiner boom will end keeps investment low. That strains capacity and keeps the boom running. Over the past six quarters, Wall Street analysts have consistently underestimated refiner earnings. They still are.
It's time to back away from buying Delek US Holdings, says Roger Read at Wells Fargo Securities. He has trimmed his recommendation for shares of the Brentwood-based oil refiner and marketer to 'market perform' from 'outperform.' Nevertheless, he has raised his price target range to $39 to $41 from $35 to $37 and says the refining sector should continue to do well. Read's move took its tool Wednesday, though: The stock (Ticker: DK) fell almost 6 percent, trimming its year-to-date gains to "only" 45 percent.
Also taking a hit Wednesday was LifePoint Hospitals, which slipped more than 2 percent — likely because of the broader market malaise — even though UBS analyst A.J. Rice raised his target to $48 from $46. Rice reiterated his 'neutral' rating on the shares of the Brentwood-based hospital chain (Ticker: LPNT).
The last time Delek US Holdings executives spoke to an investor conference, shares of the Brentwood-based oil refiner and marketer spiked big time. They popped again Tuesday without such a catalyst — rising 4.6 percent to another all-time high — but traders looking for a reason to jump in may have one. On Thursday, execs will address the Credit Suisse Energy Summit in Vail. For an early peek at their presentation, click here.
Despite doubling since last July, Delek shares could have farther to run and not just based on momentum. They are still valued at just nine times their projected 2013 earnings and analysts have hiked their full-year estimates to $3.95 from $3.49 in the past month based on widespread optimism in the refining space.
The executives running newly public Delek Logistics Partners have declared the company's first quarterly dividend, which is prorated based on its early-November IPO date. Chairman and CEO Uzi Yemin also says he expects to lift that payout rate slightly starting this quarter. Look for a 38.5-cent dividend every three months, which would give Delek Logistics (Ticker: DKL) a yield of more than 6 percent based on this morning's opening price of $25.60.
Brian Drab at William Blair has cut his rating on shares of Clarcor to 'market perform' from 'outperform,' where he had had them since August of 2011. The move comes shortly after Franklin-based Clarcor reported Q4 profits and said its 2013 would be below the Street's consensus. Shares of Clarcor (Ticker: CLC) ended last week up about 3 percent and have risen about 10 percent over the past three months.
Edward Westlake, refining analyst at Credit Suisse, sees more good things ahead for Delek US Holdings and other independent refiners even though he has lowered his Q4 earnings estimates a bit. Looking forward to 2013, his big themes include both improvements in the margin dynamics and "continued appreciation of the free cash generation and the value of higher multiple businesses within the group which suggest the shares still offer value." Because of that, Westlake has boosted his price targets for Delek and a number of its peers by about 7 percent. Delek (Ticker: DK) is up more than 20 percent year to date and has soared 60 percent since late July.
Shares of Delek US Holdings (Ticker: DK) have climbed almost 10 percent in Friday trading, bringing them close to their all-time high set in mid-2007. Volume is on track to quadruple the stock's daily average and traders are lapping up the positive action.
There's definitely a technical aspect to the breakout — Delek had been in a pretty tight range around $25 since last summer — but it looks like the company's presentation at a Deutsche Bank conference also has given some investors fundamental reasons to bid up the stock. (See below for one slide suggesting the company's east Texas refinery will be more profitable this year.) Another potential catalyst could be the mention earlier this week of a $600 million year-end cash position; that would be almost double its Sept. 30 cash holdings and could lead to more special dividends.