One thing that lower gasoline prices over the past year have done is get American drivers back on the road in a big way, and they were out in full force over the recent Fourth of July holiday weekend. A new research report from Cowen notes that the most recent U.S. Energy Information Administration (EIA) weekly petroleum status report indicated that the recent four-week average gasoline demand of over 9.5 million barrels-per-day, was up over 6% year over year. Year to date, cumulative average demand was reported at over 9 million barrels per day, up 3.6% over the past year.

The kind of gasoline demand is driving solid numbers for the top refiners, which have been hit somewhat this year, after shining over the past couple of years, and some have fallen out of favor, not unlike the utility stocks. The Cowen team keep six refiners rated Outperform, and three of the companies are the analysts’ top picks to buy now.

PBF Energy

This company is down from highs printed in April but is bouncing back nicely. PBF Energy Inc. (NYSE: PBF) engages in the refining and supply of petroleum products. It provides gasoline, ultra-low-sulfur diesel, heating oil, jet fuel, lubricants, petrochemicals and asphalt, as well as unbranded transportation fuels, heating oil, petrochemical feedstocks and other petroleum products. It has stated in the past that the rising RIN costs will be passed along to the consumer, which make for bad publicity, but will increase earnings.

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The stock surged last month when the company announced plans to acquire the Chalmette Refinery outside of New Orleans, a joint venture between Exxon Mobil and Venezuela’s PDVSA, for $322 million. With the addition of Chalmette to its portfolio, PBF will be able to boost its capacity by an additional 189,000 barrels per day from its current capacity of 725,000 barrels per day. It is expected that this deal will be able to boost the company’s earnings by as much as 20%.

PBF investors are paid an outstanding 4.04% dividend. The Cowen price objective for the stock is $35. The Thomson/First Call consensus price target is higher at $36.60. The stock closed most recently at $29.68.
Tesoro

Cowen analysts are much higher on yearly earnings here than the Wall Street consensus. Tesoro Corp. (NYSE: TSO) is an independent refiner and marketer of petroleum products. Through its subsidiaries, it operates six refineries in the western United States with a combined capacity of over 850,000 barrels per day and ownership in a logistics business that includes a 36% interest in Tesoro Logistics L.P. and ownership of its general partner. Tesoro’s retail-marketing system includes over 2,200 retail stations under the ARCO, Shell, Exxon, Mobil, USA Gasoline and Tesoro brands.

The company continues to be plagued by delays in a detailed government review of Tesoro’s proposed $210 million railport project in Washington state. Now it appears a final decision will not happen until 2016, according to a state council’s published schedule. The 360,000 barrels-per-day project would be the biggest in the United States, moving domestic and Canadian crude via rail to Washington’s Port of Vancouver, where it would be loaded onto vessels to supply West Coast refineries that are located mainly in California.

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Tesoro investors are paid a 1.86% dividend. The Cowen price target is $99, and the consensus target is $105.64. The shares ended last week at $91.21.

Valero Energy

Here too, the Cowen team is higher that Wall Street estimates for 2015 earnings. Valero Energy Corp. (NYSE: VLO) has 56% of companywide refining capacity located in the U.S. Gulf Coast, which makes Valero well-positioned to benefit from the ongoing infrastructure debottlenecking of inland crude oil supply in 2015 and beyond. Some Wall Street estimates have the company generating an astounding free cash flow compounded annual growth rate of 24% during the period from now to 2016.

The Cowen team is very bullish on the big pile of cash the company has, and they are specially interested in possible mergers and acquisition activity in both refining and midstream assets. They are also very positive on Valero’s ability to beat second-quarter earnings estimates when the company reports on July 30.

Valero investors are paid a 2.47% dividend. The Cowen price target is $70, and the consensus target is $71.57. Valero closed at $64.72.

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With the refiners starting to come back, these top stocks to buy make good sense for long-term energy investors. They also make sense in a volatile market that may be ready to see a significant correction.

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