Shares in transport fuel supplier Caltex Australia Limited (ASX: CTX) have been upgraded to buy from neutral by Citi today, with share prices down half a percent to $33.24 at the time of writing.
Citi suggests the stock has underperformed since its full-year results were handed down on February 27, which saw Caltex come in marginally above guidance, with a replacement cost operating profit up 18% to $621 million.
The Citi broker suspects the market has underestimated the medium-term outlook for earnings growth out of Caltex and has kept the price target steady at $39.71 labelling the company's earnings outlook as "a little uncertain", but maintaining that "prudent capital allocation" had consistently seen Caltex deliver "top-quartile returns historically."
Caltex has declared a fully-franked dividend of 61c per share to be paid out on April 6 and the company peg its improved results to strong performance out of its Lytton refinery which managed to up earnings by 50% for FY17.
