A High-Dividend Stock to Buy Before It Turns Around

HF Sinclair remains a turnaround story. Management is showing progress in improving reliability and efficiency and cutting costs across the portfolio to strengthen competitiveness. It’s focusing on shareholder returns, too, which we think is the right playbook to improve valuation. This narrow-moat company does face the potential for lower margins if tariff-related economic weakness comes to fruition. But with the stock trading 17% below our fair value estimate and offering a robust yield, we think HF Sinclair is an appealing choice for patient investors today. The undervalued stock appears on our list of The Best Energy Stocks to Buy Now and is one of Morningstar Chief US Market Strategist Dave Sekera’s 6 Stocks to Buy in July for the Long Term.

HF Sinclair is a fully integrated independent company with refining, marketing, renewables, specialty lubricants, and midstream businesses. While the integrated portfolio arguably should improve its competitive position, poor refining performance has weighed on earnings and the share price. Management is working to rectify the refining issues and bring operating costs down. Execution on this front is critical to improving overall company profitability. We don’t believe recent poor performance indicates an erosion in structural competitive advantages. Ultimately, we expect management to improve reliability and reduce costs, preserving returns. However, given its portfolio, HF Sinclair is unlikely to achieve the lower costs of some of its larger, better-positioned peers.

Key Morningstar Metrics for HF Sinclair

• Fair Value Estimate: $51
• Star Rating: 4 Stars
• Economic Moat Rating: Narrow
• Uncertainty Rating: Very High

Economic Moat Rating

Our $51 fair value estimate corresponds to an enterprise value of 8.8 times our 2025 EBITDA forecast of $1.3 billion. We model relatively strong refining market conditions to persist through 2026 before returning to midcycle levels in the later years of our forecast. We expect US refiners to maintain a cost advantage relative to most global peers. We assume HF Sinclair achieves lower per-unit costs as it improves reliability. Management targets operating costs of $7.25 a barrel near-term, down from $7.98/bbl in 2024, and $6.50/bbl long-term. We assume it largely achieves this goal by the end of our five-year forecast. Refining profitability should also improve thanks to yield enhancement and reliability investments, driving higher capture rates. Earnings growth should largely come from new renewable diesel capacity reaching its full potential while market margins and credit prices improve.

Read more about HF Sinclair’s moat rating.

Fair Value Estimate for HF Sinclair Stock

Our $51 fair value estimate corresponds to a forward enterprise value/EBITDA multiple of 8.8 times our 2025 EBITDA forecast of $1.3 billion. We model relatively strong refining market conditions to persist through 2026 before returning to midcycle levels in the later years of our forecast. We expect US refiners to maintain a cost advantage relative to most global peers. We assume HF Sinclair achieves lower per-unit costs as it improves reliability. Management targets operating costs of $7.25/bbl near-term, from $7.98/bbl in 2024, and $6.50/bbl long-term. We assume it largely achieves this goal by the end of our five-year forecast. Refining profitability should also improve over time thanks to yield enhancement and reliability investments, driving higher capture rates. Earnings growth should largely come from new renewable diesel capacity reaching its full potential while market margins and credit prices improve from current levels.

Read more about HF Sinclair’s fair value estimate.

Risk and Uncertainty

Primary industrywide risks are a potential economic slowdown or quickly rising oil prices that destroy demand and crush refining margins. Additionally, the company’s historically strong performance is attributable to wide crude differentials. If inland markets disconnect from global product pricing, then prices might be based on regional crude prices, negating the advantage of light crude differentials. In the long term, adoption of electric vehicles could reduce demand for the company’s primary products, particularly gasoline. Renewable diesel economics rely on continued government support for blending mandates. HF Sinclair also holds the risk of oil or product spills or emissions from its refineries.

Read more about HF Sinclair’s risk and uncertainty.

HF Sinclair Bulls Say

• The Sinclair acquisition adds refining assets complementary to HF’s legacy footprint, as well as a marketing business that the portfolio lacked, improving competitiveness.
• Investments in renewable diesel should deliver free cash flow and high returns while offering diversification from petroleum and reducing carbon intensity.
• Management should improve reliability and reduce costs, which would increase earnings power and drive the shares higher.

HF Sinclair Bears Say

• HF Sinclair’s refining operating costs are much higher than peers’, and its diversified model reduces exposure to rising refining margins.
• The acquired lubricants business has failed to live up to expectations, resulting in impairment. It might not fulfill future expectations either, potentially necessitating a divestiture at an unattractive price.
• Growing EV adoption threatens the long-term viability of HF Sinclair’s refining business, given the high proportion of gasoline production.

This article was compiled by Susan Dziubinski and Sylvia Hauser. Data as of July 2, 2025.