Is Western Refining Destined for Greatness?http://www.fool.com/investing/general/2013/10/13/is-western-refining-destined-for-greatness.aspx Alex Planes
October 13, 2013
Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does Western Refining (NYSE: WNR) fit the bill? Let's look at what its recent results tell us about its potential for future gains.
What we're looking for
What the numbers tell you
How we got here and where we're going
Over the past few months, crude oil refiners have been struggling to maintain their profitability due to a compression in the price differential between the two most popular crude oil benchmarks, the internationally traded Brent and the domestic West Texas Intermediate, or WTI. Fool contributor Isac Simon notes that the WTI's $20 per barrel discount against Brent crude has been wiped out as the efficient outflow of crude oil to Gulf Coast refineries from the Cushing hub increased the availability of domestic crude oil. Consequently, Western's net income fell 33.86% to $126.8 million.
This isn't even the worst performance among domestic refiners: The nation's fourth-largest refiner, Marathon Petroleum (NYSE: MPC), recently posted a quarterly net income of $593 million, down 58% from its year-ago quarter. Fool contributor Dan Caplinger notes that Western is exposed to more risk than its larger rivals because it largely relies on sales in the domestic gasoline and refined-products market. In addition, the new EPA regulation for renewable fuel credits will squeeze the profitability of small refiners, as it demands blending renewable fuels into