Valero initiated with a Buy at Citi

Citi analyst Vikram Bagri initiated coverage of Valero with a Buy rating and $160 price target. The analyst initiated coverage of the refiners with two Buys and three Neutrals. Cracks are healthy and likely to build in Q1 on seasonality, but Citi sees medium-term downside as global capacity ramps and economic activity may slow later in the year, the analyst tells investors in a research note. The firm says renewable capacity at covered refiners is largely online and further growth beyond planned projects “appears to be uncertain given debatable return profile.” In this scenario, cost initiatives should drive outperformance, the firm contends. Citi sees Phillips 66 (PSX) as the most catalyst rich refiner with significant potential for operational improvements. Valero (VLO) continues to lead the way in strong execution and best positioned to perform in any environment, the firm adds. Delek US (DK) is its least preferred name in the group.