Goldman Sachs Group, Inc.: Remains bullish on the refining industry outlook; Valero Energy Corporation (VLO.US), Marathon Petroleum (MPC.US), and HF Sinclair (DINO.US) are top picks.

Title context: Goldman Sachs Group, Inc.: Remains bullish on the refining industry outlook; Valero Energy Corporation (VLO.US), Marathon Petroleum (MPC.US), and HF Sinclair (DINO.US) are top picks. Text: As the U.S. refining industry prepares to enter the third-quarter 2026 earnings season, Goldman Sachs Group, Inc. has updated its earnings forecasts for the U.S. refining industry. Ahead of the results, Goldman Sachs Group, Inc., based on conversations with investors, is focusing on three core debates: (a) the outlook for mid-cycle margins after global refining fundamentals tightened and supply was disrupted; (b) the trajectory of the light-heavy crude oil spread as heavy crude supply from Canada and Venezuela increases; (c) capital allocation priorities, namely how to pace maintaining a strong balance sheet, advancing internal growth projects, and returning capital to shareholders. Despite these issues, Goldman Sachs Group, Inc. remains bullish on the overall refining environment and emphasizes its relatively preferred stocks rated "Buy," including Valero Energy Corporation (VLO.US), Marathon Petroleum (MPC.US), and HF Sinclair (DINO.US). Goldman Sachs Group, Inc. said that for Valero Energy Corporation, given the company's advantageous positioning along the U.S. Gulf Coast, high-quality asset portfolio, and management's consistently strong execution, the firm continues to believe the company will be a key beneficiary of tightening refining fundamentals. For Marathon Petroleum, Goldman Sachs Group, Inc. is bullish on its shareholder capital return prospects. The company's capital return capacity is strongly supported by distributions from MPLX LP (MPLX.US), as well as by its own scale advantages, strong margin capture capability, and solid balance sheet. Finally, for investors focused on small- and mid-cap stocks, Goldman Sachs Group, Inc. reiterates its positive view on HF Sinclair. Given the company's business positioning in niche refining markets, the earnings contribution from its lubricants business, and the potential opportunities from Small Refinery Exemptions (SRE), the firm believes its current share price level offers an attractive risk-reward ratio. Key Stock Analysis Valero Energy Corporation Goldman Sachs Group, Inc. assigns Valero Energy Corporation a "Buy" rating with a target price of $496. The firm continues to emphasize that Valero Energy Corporation has superior asset positioning along the U.S. Gulf Coast, the flexibility to adjust its crude slate, and low-cost operating advantages. The firm believes these factors will support the company in generating substantial free cash flow in the short and medium term. According to Goldman Sachs Group, Inc.'s updated forecasts, the company's free cash flow yields for 2027 and 2028 are expected to be approximately 11% and 6%, respectively. In addition, Goldman Sachs Group, Inc. is positive on management's prudent approach to capital allocation. Valero Energy Corporation prioritizes safe and reliable operations, a strong balance sheet, and shareholder returns. Notably, the company remains committed to returning 40% to 50% of adjusted operating cash flow to shareholders through share repurchases and dividends. On the upcoming earnings call, Goldman Sachs Group, Inc. expects investors to focus on the following issues: (a) commentary on the refining industry macro environment; (b) the outlook for the light-heavy crude oil spread; (c) renewable diesel margins in the DGD business. Marathon Petroleum Goldman Sachs Group, Inc. assigns Marathon Petroleum a "Buy" rating with a target price of $519. Goldman Sachs Group, Inc. continues to favor Marathon Petroleum due to the company's scale advantages, fully integrated value chain, and high-quality business positioning along the U.S. Gulf Coast and West Coast. Goldman Sachs Group, Inc. also continues to favor the value of the company's refining business, mainly supported by its commercial optimization capabilities, low-cost operating advantages, and track record of consistently achieving strong margins. Finally, Goldman Sachs Group, Inc. views Marathon Petroleum's capital return prospects as attractive, as shareholder returns throughout the industry cycle are strongly supported by midstream business distributions. MPLX distributions are able to cover Marathon Petroleum's maintenance capital expenditures and dividend payments. Ahead of the earnings release, Goldman Sachs Group, Inc. will focus on management's commentary on the following issues: (a) the refining margin outlook across the company's operating regions; (b) MPLX's future distribution prospects; (c) capital allocation priorities. HF Sinclair Goldman Sachs Group, Inc. assigns HF Sinclair a "Buy" rating with a target price of $142. For investors focused on small- and mid-cap stocks, Goldman Sachs Group, Inc. highlights HF Sinclair. The firm believes the stock could deliver a total return of approximately 19% relative to its current share price, an expectation mainly supported by the following factors: the company's business positioning in niche refining markets such as the Rocky Mountains and the U.S. Mid-Continent, the meaningful earnings contribution from business segments outside refining, and the potential opportunities from Small Refinery Exemptions (SRE). In addition, Goldman Sachs Group, Inc. emphasizes that management is committed to improving the operating performance of the refining business, with specific measures including optimizing the crude slate, increasing the share of aviation fuel production, and enhancing operational reliability. Looking ahead, Goldman Sachs Group, Inc. expects the key discussion points at HF Sinclair's third-quarter 2026 earnings call to include: (a) supply-demand dynamics in the refining industry; (b) Renewable Identification Number (RIN) monetization and future expectations for Small Refinery Exemptions (SRE); (c) updates on the company's midstream growth projects; (d) capital allocation priorities; (e) updates on the planned spin-off of the lubricants business. Phillips 66 Goldman Sachs Group, Inc. assigns Phillips 66 (PSX.US) a "Neutral" rating with a target price of $297. Goldman Sachs Group, Inc. notes that in conversations with investors, the core debates surrounding the company mainly center on three areas: the deleveraging process, improvement in refining operations performance, and whether the midstream business can achieve its target of $4.5 billion in annualized EBITDA by 2027 as planned. Nevertheless, Goldman Sachs Group, Inc. believes the stock's risk-reward ratio has become more attractive following a recent site visit to the Wood River refinery. The firm believes the company is gradually improving the profitability of its refining business, mainly driven by improved crude procurement, higher asset utilization, and lower operating costs. Goldman Sachs Group, Inc. is also positive on management's continued commitment to returning capital to shareholders while strengthening the overall balance sheet. According to the firm's updated model, the company is expected to achieve its $17 billion total debt target this year while returning at least 50% of adjusted operating cash flow to shareholders. Ahead of the earnings release, Goldman Sachs Group, Inc. expects investors to focus on the following issues: (a) overall refining industry fundamentals; (b) opportunities to further advance the refining improvement plan; (c) updates on midstream growth projects; (d) capital allocation priorities. PBF Energy Goldman Sachs Group, Inc. assigns PBF Energy (PBF.US) a "Neutral" rating with a target price of $91. As the earnings season approaches, Goldman Sachs Group, Inc. says it wants to learn more about the company's capital allocation priorities. The firm particularly emphasizes that the company's strong cash flow generation capability could significantly accelerate the deleveraging process. In addition to the strong refining margin environment, investor discussions around the stock largely center on the company's exposure to the light-heavy crude oil spread. Goldman Sachs Group, Inc. notes that as the market expects continued growth in oil production from Canada and Latin America, a widening light-heavy crude spread has become a focus of market attention. The firm also hopes management will further explain the company's strategy for addressing Renewable Volume Obligations (RVO), especially how the company will manage related obligations in an environment of high RIN prices. CVR Energy Goldman Sachs Group, Inc. assigns CVR Energy (CVI.US) a "Sell" rating with a target price of $50. For CVI, Goldman Sachs Group, Inc. notes that investor discussions mainly focus on the stock's relative performance and the results the company may achieve in its upcoming third-quarter earnings. Although the fourth quarter is typically a seasonally weaker period, especially in the U.S. Mid-Continent, Goldman Sachs Group, Inc. believes earnings forecasts could still remain at elevated levels. Factors supporting this view include low inventory levels, continued global supply disruptions, and relatively resilient demand. In addition, discussions around CVR Energy also center on capital allocation priorities, particularly how the company paces the allocation of funds among dividend payments, deleveraging, M&A, and capital expenditures. In addition, Goldman Sachs Group, Inc. assigns Delek US (DK.US) a "Buy" rating with a target price of $83; and assigns Par Pacific (PARR.US) a "Buy" rating with a target price of $90.