Tesoro (TSO +2.4%) is higher after Goldman Sachs adds the stock to its Conviction Buy List with a $121 price target, saying it remains undervalued and can generate solid cash flow.
The firm says TSO's acquisition of Western Refining could drive earnings improvement from "better Permian crude access, higher product pricing and $100M-$125M in cost reductions."
To reach the six-month $121 price target, Goldman estimates $55 of value comes from retail and marketing, $48 comes from logistics and TLLP, while marketing provides a source of constant cash flow and logistics generates $11/share.
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