Option Trade - Tesoro Corp. (TSO)
Monday, July 02, 2012

*OPTION TRADE: Buy the TSO Nov 2012 25.000 call (TSO121117C00025000) at or under $2.60, good for the day. Place a protective stop limit at $1.00 and a pre-determined sell at $4.00.

by Ian Harvey

Introduction

The Smile Says It All!

Despite oil’s widely heralded entrance into bear market territory, not all energy stocks have fallen victim to the bear’s antics. In fact, while oil has continued its slide, some refining stocks have been building notable bases and appear poised to reverse back into uptrends.

One such refining company is Tesoro (NYSE: TSO), which has been building a two-month base that might prove to be a bottom in the stock price for months to come. During the past week, TSO has consolidated at key resistance at $24. A break of this level might portend a further rise in price.

Description of Tesoro

Tesoro Corporation (Tesoro) is an independent petroleum refiners and marketers in the United States. The Company’s subsidiaries, operating through two business segments: manufacture and sell transportation fuels.

Trading Movement

In trading on Wednesday, shares of Tesoro Corporation (NYSE: TSO) crossed above their 200 day moving average of $24.49, changing hands as high as $24.65 per share. Tesoro Corporation shares are currently trading up about 1.2% on the day.

The chart below shows the one year performance of TSO shares, versus its 200 day moving average:

Looking at the chart above, TSO’s low point in its 52 week range is $17.43 per share, with $30.15 as the 52 week high point — that compares with a last trade of $24.39.

The company has a market cap of $3.327 billion and a price-to-earnings ratio of 7.01.

Analysts Expectations

Tesoro‘s stock had its “neutral” rating restated by Zacks in a research report issued to clients and investors on Monday. They currently have a $26.00 price target on the stock.

Zacks‘ analyst wrote, “We are maintaining our Neutral recommendation on Tesoro shares. The company is characterized by a lineup of superior refineries, crude oil supply expansion plans and accretive acquisitions. We believe that Tesoro has the ability to deliver impressive performances over the coming months, based on its strong market position, various strategic initiatives and cost-reduction steps. The company is also in the process of disposing assets that do not fit within the company’s long-term development plans. However, we believe that these positive aspects are well reflected in the current share price, leaving little room for upward movement in the near term.”

Other equities research analysts have also recently issued reports about the stock. Analysts at Goldman Sachs upgraded shares of Tesoro from a “sell” rating to a “neutral” rating in a research note to investors on Wednesday, June 20th. Separately, analysts at UBS AG upgraded shares of Tesoro from a “neutral” rating to a “buy” rating in a research note to investors on Friday, June 1st. They now have a $33.00 price target on the stock, up previously from $30.00. Finally, analysts at Barclays Capital reiterated an “overweight” rating on shares of Tesoro in a research note to investors on Tuesday, May 22nd.

Earnings Data

Tesoro last released its earnings data on Wednesday, May 2nd. The company reported $0.39 EPS for the quarter, beating the Thomson Reuters consensus estimate of $0.29 by $0.10. The company’s quarterly revenue was up 19.8% on a year-over-year basis. Analysts expect that Tesoro will post $1.55 EPS next quarter.

The Options Trade

To exploit the anticipated bullish move the following is recommended…..

*OPTION TRADE: Buy the TSO Nov 2012 25.000 call (TSO121117C00025000) at or under $2.60, good for the day. Place a protective stop limit at $1.00 and a pre-determined sell at $4.00



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