With a 3.5% gain to $30.40, the shares of Caltex Australia Limited (ASX: CTX) have been amongst the best performers on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) today.
Today's gain is likely to be the result of research notes out of investment banks UBS and Citi, which reveal their analysts have each upgraded the fuel retailer to a buy rating following yesterday's refiner margin update.
Rather positively yesterday's update revealed that its refiner margins are heading in the right direction. In November Caltex reported a realised refiner margin of US$11.83 a barrel, up from US$11.38 a barrel in October.
So with improvements being made and its shares down 19% this year, I would have to agree that Caltex looks like a great option for investors now as oil prices rise.
Caltex shares have hit a spot of weakness in recent months over fears of losing the Woolworths Limited (ASX: WOW) fuel contract. Woolworths is looking to offload the non-core asset and while Caltex has made an offer, the Australian Financial Review believes that BP is in the driving seat.
If the global fuel giant wins the auction then it will almost certainly convert the 530 petrol stations into BP-branded petrol stations. This would be a major blow to the Caltex network.
But that appears to be priced into its share price in my opinion, which means investors can focus purely on the improved performance of the rest of the Caltex network.
At just 15x estimated FY 2016's earnings I think Caltex is good value at this point in time. However investors may want to hold off an investment until management provides its full year profit update.
Traditionally the company updates the market with its full year profit guidance in the middle of December, so investors won't have to wait long for it.
