In a report released today, Jason Gabelman from TD Cowen maintained a Sell rating on Delek US Holdings (DK – Research Report), with a price target of $15.00.
Jason Gabelman has given his Sell rating due to a combination of factors impacting Delek US Holdings. Despite a slight outperformance in EBITDA, the company missed its free cash flow expectations, which is a concern for future financial stability. Additionally, the authorization for Delek Logistics Partners (DKL) to repurchase $150 million from Delek US Holdings is expected to be value neutral, as it will be funded from DKL’s balance sheet, providing no real financial benefit to Delek US Holdings.
Furthermore, the company’s guidance for a $50 million increase in operating expenses quarter-over-quarter was worse than anticipated. The valuation of Delek US Holdings is based on a balanced approach between EBITDA and free cash flow projections up to 2026, with the expectation of continued negative free cash flow at the parent company level. These factors contribute to a reduced price target of $15 and support the Sell rating.