Seeking Alpha: Good Or Bad, PBF Energy Won't Be Boring

At what point to a company's misses say more about the characteristics of an industry and those analysts who cover it rather than the company itself? I ask that question at the beginning, as it seems to really apply to PBF Energy (PBF). PBF has a lot of things that ought to work in its favor, including good exposure to differentials in Bakken and Western Canadian crude, relatively complex refineries in the East, and value-adding rail logistics assets. Yet, PBF Energy has been scolded repeatedly by analysts for missing their estimates, with each of the company's three reported quarters to date for 2013 coming in below expectations.

I think the reality is that the refinery industry is a difficult one to forecast, particularly given the volatility in the differentials that underpin so much of the investment thesis for PBF Energy. I do believe that that company's ability to take crude from Western Canada and the Bakken and transport it to its East Coast refineries at very competitive costs is an advantage, and I'm skeptical that pipelines are a high-probability near-term threat to the crude-by-rail thesis. On balance, I think PBF is undervalued today, but readers considering these shares have to realize how the volatility of differentials, logistics capacity on the supply side, renewable fuel policies, and basic economic conditions feed into the above-average volatility of these shares.

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Good Or Bad, PBF Energy Won't Be Boring