The Best Company to Own Right Now
Joseph is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
It is very rare to find a company with high growth and a high dividend. One company that recently went public has both of these traits. After releasing its first earnings report, it is clear that this is a stock everyone should own.
Overview of the Company
CVR Refining (NYSE: CVRR), as their name clearly states, is a petroleum refiner in the United States. They make money by buying crude oil and selling the refined products, mainly gasoline and diesel. They are strategically located in the central United States, giving them access to cheap mid-continent local and Canadian crude oils.
Fourth Quarter 2012 Results
CVR's fourth quarter was strong and gave insight into how this company is growing. Here's a summary of how CVR did in the fourth quarter of 2011:
- Net income fell to $54.6 million from $77.5 million
- Net sales increased 85.4% to $1.8162 billion
- Adjusted EBITDA increased 342.9% to $196.2 million
- Operating income increased to $120.4 million from a loss of $11.8 million
Full Year 2012 Results
Investors could not have asked for a better year than the one CVR Refining had in 2012. Here are some of the key statistics:
- Net income increased 23.9% to $595.3 million
- Net sales increased 74.3% to $8.2817 billion
- Adjusted EBITDA increased 103.7% to $1.1762 billion
- Operating income increased 117.6% to $993.9 million
When CVR Refining went public in January, they had anticipated paying out $4.72 in dividends for the year. This would have represented a yield of about 18.8%. However, due to stronger financials, they have increased their distribution expectations to between $5.50 and $6.50 for the year. From the IPO price, this would make the stock yield around 22% to 26%.
Management stated, "We expect 2013 to be a rewarding year for the company and its unitholders." This company is clearly dedicated to returning value to its investors.
For the full year of 2013, analysts currently project earnings to increase 28.3% to $6.31 per share. After the recent blowout quarter, I believe these estimates are much too low and will soon be increased. Sometimes it takes a quarter after going public to get analysts to take a deeper look at a company.
CVR Energy and Carl Icahn
CVR Refining was split off from CVR Energy (NYSE: CVI), and this was made possible by Carl Icahn's Icahn Enterprises (NASDAQ: IEP). CVR Energy is a holding company that is involved in petroleum refining and nitrogen fertilizer manufacturing. They own two limited partnerships: CVR Partners, which owns and operates the nitrogen fertilizer manufacturing business, and CVR Refining, which owns the refining business, as mentioned before. As a whole, CVR Energy reported record earnings for 2012 and is only getting stronger.
Icahn Enterprises noticed the value in CVR Energy before anyone else. As a company it was solid, but Icahn knew that by splitting off the refining unit, it would unlock more value. Therefore, in early 2012, Icahn began buying up the stock with an activist strategy, gaining a 14.5% stake and then trying to discuss his ideas with managers. CVR Energy's management fought back against the idea, but eventually gave in and let Icahn build an 82% ownership stake. By building a majority stake, Icahn was then able to split off CVR Refining in January of 2013, as well as offer a special dividend and increase the annual dividend of CVR Energy. Since Icahn got involved, CVR Energy's stock has risen well over 100%.
The Foolish Bottom Line
The growth and high yield of CVR Refining make it an incredible play in the energy bull market. Carl Icahn's control will ensure that this company continues to impress and return maximum value to shareholders. After reporting earnings, the stock hit its 52 week high, so wait for it to come down a bit before starting a position. This is a great long term investment to make as soon as possible.
Joseph Solitro owns shares of Icahn Enterprises L.P. and CVR Refining. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!