Tesoro Corporation’s (TSO) third-quarter 2009 results came in significantly better than expected, helped by better demand balance in the company’s key West Coast region. Earnings per share came in at 24 cents, against Zacks Consensus Estimate of a penny loss. Tesoro’s outperformance is in contrast to the steep losses posted by the other major refiners that have already reported -- Valero Energy Corp. (VLO) and Sunoco Inc. (SUN). However, compared to the year-ago period, Tesoro’s earnings per share plunged 87.1%, while sales declined 45.4% to $4.7 billion -- severely hampered by depressed refining margins and lower throughput on the back of weak fuel demand and high inventories. Refining Segment Results Tesoro’s refining segment experienced a significant decline in operating income (operating income of $84 million vs. $476 million in the year-earlier quarter) due to struggling profit margins for the production of distillate ...

The emerging positive narrative of a favorable outlook for the U.S. economy has done wonders for the markets, particularly equities and commodities. The broad equity markets as well as most commodity groups are up smartly from their early-March lows.

Crude oil's gains have been even more impressive, given its heavy leverage to the health of the global economy. Our view is that oil should be able to hold onto its recent gains and consolidate around current levels, provided this favorable economic view remains in place.

While we have greater confidence in the staying power of the current oil rally, this does not mean that we will not see any short-term pullbacks. On the whole, we expect oil prices in 2010 to be higher than the 2009 levels, but remain significantly below the 2008 peak levels.

Crude oil's near-term fundamentals remain dismal, to say the least. Inventories in the U.S. are at multi-year highs

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The emerging positive narrative of a favorable outlook for the U.S. economy has done wonders for the markets, particularly equities and commodities. The broad equity markets as well as most commodity groups are up smartly from their early-March lows. Crude oil’s gains have been even more impressive, given its heavy leverage to the health of the global economy. Our view is that oil should be able to hold onto its recent gains and consolidate around current levels, provided this favorable economic view remains in place. While we have greater confidence in the staying power of the current oil rally, this does not mean that we will not see any short-term pullbacks. On the whole, we expect oil prices in 2010 to be higher than the 2009 levels, but remain significantly below the 2008 peak levels. Crude oil’s near-term fundamentals remain dismal, to say the least. Inventories ...

Our Underperform recommendation on Tesoro (TSO) shares takes into account the bearish refining margin outlook. A growing supply overhang in the face of a recession-induced fall in global oil product demand has led to a squeeze in refiners profits.

Tesoro's lack of geographic diversification and heavy exposure to the weak California market has also become a major liability, in our view. Weighed down by these factors, the company posted a second-quarter 2009 loss.

Overall, we see a fairly unfavorable macro backdrop for independent refiners like Tesoro. We believe this will cause Tesoro shares to underperform relative to the market as well as the sector in the coming quarters.Zacks Investment Research

Our Underperform recommendation on Tesoro (TSO) shares takes into account the bearish refining margin outlook. A growing supply overhang in the face of a recession-induced fall in global oil product demand has led to a squeeze in refiners’ profits. Tesoro’s lack of geographic diversification and heavy exposure to the weak California market has also become a major liability, in our view.   With the outlook for domestic refiners remaining bleak, we see little reason for investors to own the stock as the ongoing long-term fundamental changes to the industry indicate struggle. The major factor that could negatively impact refining profitability is the shifting balance in supply and demand with capacity additions outpacing incremental demand.   Tesoro’s weaker-than-expected second quarter results have further added to this negative sentiment. The second largest refiner in the western U.S. posted a second-quarter loss of 33 cents per share, which was below the ...

Two Big Reasons to Dump your Oil Refinery

Tony Daltorio, The Investment U Research Team

Quite simply, this is not a good time to be in the business of refining oil in the United States.

The obvious reason for this is the continuing recession which has led to lower demand for gasoline and other refined products. With the summer driving season past the halfway point, having the word ’staycation’ become commonplace is not good news for the refiners.

But that’s not all. And it goes well beyond simple economic downturn.

There are other factors at work. And unfortunately, many have escaped the notice of many investors and much of Wall Street.

While everyone was focused on the sharp rise recently of the price of WTI crude oil, other things have been conspiring against domestic refiners of all sorts. Here’s what you need

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The Producer Price Index rose a shockingly high 1.8% in June, far higher than the tame readings of 0.2% in May and 0.3% in April. It was also much higher than the 0.9% consensus expectation. To be sure, most of the acceleration had to do with the rise in energy prices, which rose 6.6% on the month on top of a 2.9% rise in May. In May, the rise in energy prices was largely offset by a 1.6% decline in food prices. That left the May change in Core PPI at a slightly negative 0.1%. That was not the case this time around, as finished food prices jumped 1.1% to help fuel the increase in the headline number to its highest level in over a year. However, even if we take out food and energy to get the Core PPI, the increase came in at 0.5%, well above expectations ...

For Immediate Release

Chicago, IL - June 25, 2009 - Zacks.com releases the latest Zacks Industry Rank. Stocks featured in this week's analysis include Stericycle (SRCL), Quest Diagnostic (DGX), Biogen Idec (BIIB), AmeriSourceBergen (ABC), Abbott Labs (ABT), Sunoco (SUN), Tesoro (TSO), AK Steel (AKS), Nucor (NUE), United States Steel (X), Fifth Third (FITB), First Horizon National (FHN), Zions Bancorp (ZION), Suntrust Banks (STI), Franklin Resources (BEN), AllianceBernstein Holding (AB), Texas Instruments (TXN), National Semiconductor (NSM) and Micron (MU).

Zacks Industry Rank Analysis is written by Charles Rotblut, CFA, Senior Market Analyst for Zacks.com.

This Week: Second-Quarter Earnings Outlook

Second-quarter earnings will be ugly.

Median EPS is projected

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Second-quarter earnings will be ugly.

Median EPS is projected to drop 21.2%. Nearly 75% of S&P 500 members are forecast to report earnings that are lower than a year ago. 62 companies are projected to have lost money.

These numbers are not unexpected given that we remain in the midst of a recession. They could even prove to be too pessimistic given the propensity of companies to surprise and the relative improvements in economic conditions.

Growth Industries

The one sector projected to show the strongest growth is also the one with the highest political risk - Medical. The majority of medical care providers, health insurers, pharmacy benefit managers and drug companies should report a year-over-year increase in profits.

Zacks #2 Rank ("buy") stocks expected to report growth include Stericycle (

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For Immediate Release

Chicago, IL - June 16, 2009 - Zacks Equity Research highlights Maxim Integrated Products (MXIM) as the Bull of the Day and Sonic Innovations (SNCI) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Valero (VLO), Tesoro (TSO) and ConocoPhillips (COP).

Full analysis of all these stocks is available at http://at.zacks.com/?id=2676.

Here is a synopsis of all five stocks:

Bull of the Day:

Maxim Integrated Products (MXIM) is an OEM of semiconductor analog and mixed signal ICs. March quarter results were short of consensus estimates, although they were in-line with management's own expectations.

Forward guidance is for a revenue increase of 3-12% in the June quarter. Order rates started picking up in three of the four end markets, and the fourth market is expected to

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