Tesoro shares rise on 3rd-qtr earnings gain

SAN ANTONIO - Tesoro Corp. reported third-quarter earnings that beat Wall Street expectations and eased fears of investors who have sent the company's shares down about 80 percent over the past 12 months.

The San Antonio-based operator of seven refineries in the western U.S. reported its profit jumped more than fivefold on higher profit margins and an accounting gain.

After markets closed Wednesday, Tesoro reported its net income rose to $259 million, or $1.86 per share, up from $47 million, or 34 cents per share, in the year-earlier third period.

The latest quarter's result beat the consensus forecast of analysts surveyed by Thomson Reuters, who had expected a profit of $1.48 per share, on average.

The latest results were aided by an accounting change that added 29 cents a share to the bottom line. That gain was partly offset by write-downs and other charges that trimmed 6 cents from the results.

Revenue jumped 47 percent to $8.7 billion — above analysts' forecast of $7.81 billion — from $5.9 billion in the year-earlier period.

Tesoro said its gross profit margin per barrel of refined oil rose 85 percent, compared with last year's third quarter, and increased 65 percent from this year's second quarter. The improvement was aided by the recent decline in oil prices from a record high in July of $147 a barrel. Tesoro also cited tight management of its crude-oil purchases.

In a research note, Oppenheimer & Co. analyst Fadel Gheit said Tesoro's "long-term upside potential exceeds the downside risk from low refining margins. We believe the main investment risk in the stock is lower refining margins on weak petroleum product demand caused by a severe global recession."

Another analyst, Jacques Rousseau of Soleil-Back Bay Research, raised his full-year earnings estimate for Tesoro from $1.45 to $1.65 per share. Rousseau also maintained a "Hold" rating on the stock, and a $21 price target for the company's shares.

Analysts expect the company to post a full-year profit of $1 per share, on average.

Shares of Tesoro rose 5 cents to $9.95 in afternoon trading, after surging as high as $11.04 earlier in the session. In after-hours trading, the stock fell $5 to $9.90. Tesoro shares sank to their 52-week low of $7.61 on Oct. 10, after trading as high as $61.21 last October.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.