Goldman Sachs remains positive on large U.S. refiners, with MPC, VLO, and DINO as top Buy picks
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Goldman Sachs remains positive on large U.S. refiners, with MPC, VLO, and DINO as top Buy picks
The report argues that tight refining supply-demand conditions and higher assumptions for margins and RIN prices will support further upward revisions to earnings expectations for large refiners, with about 13% average upside to 2027 consensus EPS.
- Goldman Sachs maintains a constructive view on the large refining sector, based on tightening supply-demand conditions, sustained high refining margins, and remaining room for earnings upgrades.
- MPC highlights include MPLX distributions, low-cost operations, capital return capability, and exposure to the West Coast and Gulf Coast export markets; target price raised from $291 to $376.
- VLO benefits from a high-quality asset portfolio, crude slate flexibility, Gulf Coast scale advantages, and strong execution; target price raised from $286 to $357.
- DINO benefits from small refinery exemption optionality, balance sheet strength, niche refining market exposure, and improving earnings from renewable diesel and lubricants; target price raised from $81 to $109.
- PSX has improved risk-reward but remains rated Neutral because its diversified portfolio implies less upside to consensus EPS versus large refining peers.
Report interpretation
Overview
This is a Goldman Sachs earnings preview and valuation update report on large refiners in the Americas energy refining sector. Ahead of 2Q26 earnings releases, the report raises refining margin, crack spread, and RIN price assumptions to reflect tighter supply-demand fundamentals. Although refining stocks have already risen significantly, Goldman still believes earnings estimate revisions will continue to drive share performance and notes that large refiners have about 13% average upside to 2027 consensus EPS.
Core views
The core view is that large U.S. refiners remain in a favorable cycle: global refined product markets are supported by supply constraints and unplanned outages, diesel markets are tight, and U.S. refineries have limited ability to further raise diesel yield, so refining margins are likely to remain elevated. At the stock level, the report prefers MPC, VLO, and DINO, believing the three benefit respectively from capital returns, high-quality assets, and valuation/business improvement; while PSX has improved risk-reward, its more diversified business mix implies relatively limited earnings upgrade leverage.
Analysis framework
The report combines earnings preview, mark-to-market commodity pricing, earnings forecast revisions, and valuation re-rating. Goldman updates commodity price assumptions related to refining, lubricants, and renewable fuels, raises forward crack spread and RIN forecasts, and adjusts refining throughput, capture rates, non-refining business contributions, buyback assumptions, and midstream business forecasts. Valuation uses a 6-month P/E multiple and SOTP framework, combined with company asset quality, regional exposure, capital returns, and execution risk.
Methodology notes
Price-to-earnings and sum-of-the-parts valuation
The report applies P/E multiples to normalized EPS and combines this with an SOTP approach to derive 6-month target prices; DINO uses 13.0x, MPC 15.0x, VLO 16.0x, and PSX 14.0x.
Mark-to-market commodity pricing and earnings forecast revisions
Goldman updates assumptions for refining, lubricants, renewable fuels, crack spreads, and RINs to reflect the latest market environment, and adjusts 2Q26 and 2026-2028 EPS forecasts accordingly.
Goldman Sachs factor profile
This framework compares stocks versus the market and industry peers on growth, financial returns, valuation multiples, and composite percentiles, providing investment context.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- HF Sinclair Corp. (DINO.US)Buy rating; benefits from niche refining markets and SRE optionality
- Strengths
- Attractive valuation, strong balance sheet, exposure to Mid-Con and West Coast Rockies niche markets, and room for earnings improvement in renewable diesel and lubricants.
- Weaknesses
- Management needs to provide clearer strategic communication after leadership changes, and improvements in non-refining businesses still need to be delivered.
- Comparison
- Relative to large peers, DINO is more geared to valuation recovery and business inflection-point leverage.
- Risks
- Declining refining margins, non-refining earnings below expectations, and operational execution risk.
- Marathon Petroleum Corp. (MPC.US)Buy rating; one of the top large-cap refining picks
- Strengths
- MPLX distributions support capital returns, low-cost operations, strong balance sheet, and advantages from tight West Coast markets and Gulf Coast export optionality.
- Weaknesses
- Earnings remain exposed to volatility in refining margins and midstream business contributions.
- Comparison
- The report believes MPC has strong capital return capability, with capital return yields of about 8% in both 2026 and 2027.
- Risks
- Declining refining margins, operational execution, and midstream earnings below expectations.
- Valero Energy Corp. (VLO.US)Buy rating; benefits from a high refining margin environment
- Strengths
- High-quality asset portfolio, crude slate flexibility, Gulf Coast scale advantages, strong balance sheet, and solid operational execution.
- Weaknesses
- The stock has already risen significantly, so continued support from margins and capital returns is needed.
- Comparison
- VLO more directly reflects the leverage of a high-quality asset portfolio to elevated refining margins.
- Risks
- Declining refining margins, operational execution, capital returns below expectations, and uncertainty around Port Arthur downtime and DGD earnings contribution.
- Phillips 66 (PSX.US)Neutral rating; risk-reward has improved but upside leverage is relatively limited
- Strengths
- Improving refining operations, better profit environment in the Central Corridor, near-term tailwinds from chemicals and renewable fuels, and deleveraging progress that could be faster than expected.
- Weaknesses
- Its business mix is more diversified, resulting in less upside to consensus EPS versus pure refining peers; the long-term outlook for chemical margins still warrants caution.
- Comparison
- Compared with MPC, VLO, and DINO, PSX’s refining margin leverage is diluted by its diversified businesses.
- Risks
- Declining refining margins, operational execution, and chemical earnings below expectations.
Key data
- Upside to 2027 consensus EPS for large refinersAbout 13% average upsideBoth the report title and main text emphasize that earnings expectations still have room to move higher.
- DINO target price and ratingBuy, target price $109, prior $81, closing price $91.692Q26 EPS forecast is $4.36, above FactSet consensus of $4.24; 2026-2028 EPS updated to $12.26/$9.44/$7.16.
- MPC target price and ratingBuy, target price $376, prior $291, closing price $319.762Q26 EPS forecast is $14.10, above FactSet consensus of $13.69; expected to return about $8.3bn/$8.5bn through buybacks and dividends in 2026/2027, respectively.
- VLO target price and ratingBuy, target price $357, prior $286, closing price $314.802Q26 EPS forecast is $10.25, above FactSet consensus of $10.11; 2026-2028 EPS updated to $33.99/$26.88/$22.32.
- PSX target price and ratingNeutral, target price $235, prior $207, closing price $212.272Q26 EPS forecast is $7.58, above FactSet consensus of $7.42; 2026-2028 EPS updated to $21.07/$18.62/$17.59.
Impact & implications
If Goldman’s view on refining margins and supply constraints proves correct, the market may continue to revise up earnings expectations for large refiners, with stock performance driven more by EPS revisions, capital returns, and regional margin exposure. MPC and VLO are more aligned with high-quality asset and capital return logic, DINO is more aligned with valuation recovery and business improvement leverage, while PSX relies more on improved refining operations, progress toward debt targets, and earnings contributions from chemicals/renewable fuels.
Risks
- Refining margins or crack spreads may come in below expectations.
- Changes in RIN prices and regulatory assumptions, especially uncertainty related to small refinery exemptions.
- Operational execution risks, including refinery outages, project startups, capture rates, and throughput below expectations.
- Capital return pace may fall short of expectations, with buybacks and dividends not materializing in line with model assumptions.
- Uncertainty in contributions from non-refining businesses, including midstream, lubricants, renewable diesel, chemicals, and marketing.
- Refining stocks have already posted strong gains; if earnings revisions slow, valuation re-rating potential may be limited.
What to watch
- Management commentary on refining margins, capture rates, and regional crack spreads during 2Q26 earnings calls.
- MPC’s MPLX distributions, buyback and dividend pace, and progress on the El Paso yield improvement project and Robinson jet fuel project.
- VLO updates on crude differentials, cash flow impact from Port Arthur downtime, capital allocation, and earnings contribution from Diamond Green Diesel.
- DINO’s strategic direction after the CEO/CFO management transition, small refinery exemptions, non-refining earnings, and improvements in renewable diesel/lubricants businesses.
- PSX’s 2027 debt target, mid-cycle EBITDA target, refining operational improvements, and trends in chemical margins.
- Changes in global refined product outages, diesel supply-demand, and the ability of U.S. refineries to increase diesel yield.