NEW YORK (AP) — Shares of Tesoro Corp. fell Tuesday, after a Credit Suisse analyst cut his rating for the oil refiner, saying that other companies in its sector currently offer better returns.
THE SPARK: Analyst Edward Westlake lowered his rating for Tesoro to "Neutral" from "Outperform," but raised his price target by $1 to $35.
THE BIG PICTURE: Westlake said that while the San Antonio-based company's capital investments should eventually pay off for investors, there isn't much cash left over to return to investors in the form of dividends.
The analyst noted that companies that invest for growth and return cash to their shareholders are the ones who tend to prosper. Refiners such as Marathon Petroleum Corp. currently offer better returns than Tesoro, he said.
THE ANALYSIS: "Tesoro is focused on high return projects, which is good, but we believe management should also consider returning cash as soon possible," Westlake wrote in a Tuesday note to investors. "Without a dividend to demonstrate value for longer term holders, the shares are more vulnerable to short term criticisms."
THE SHARES: In midday trading, Tesoro shares fell $1.47, or 5.9 percent, to $23.36. Over the past 52 weeks, its shares have traded between $16.41 and $29.61. Since the start of this year, Tesoro shares have risen about 34 percent.