Delek US (DK) Q2 Earnings and Revenues Surpass Estimates
Delek US Holdings DK reported second-quarter 2023 adjusted net income of $1 per share, which beat the Zacks Consensus Estimate of 66 cents. The bottom line deteriorated from the year-ago quarter’s level of $4.40. The underperformance could be attributed to poor contributions from the Refining and Retail segments.
Adjusted EBITDA came in at $259.4 million compared with $462.2 million in the year-ago period.
Net revenues decreased 30% year over year to $4.2 billion. The figure, however, beat the consensus mark of $3.6 billion due to higher performance from the Logistics segment.
On Aug 4, 2023, DK’s board of directors approved a 2.2% increase in the regular dividend, bringing the quarterly payout to 23.5 cents per share. The dividend will be paid out on Aug 21, 2023, to shareholders of record as of Aug 12, 2023.
Delek US Holdings, Inc. Price, Consensus and EPS Surprise
Delek US Holdings, Inc. price-consensus-eps-surprise-chart | Delek US Holdings, Inc. Quote
Segmental Performances
Refining: Adjusted EBITDA for the segment amounted to $201.1 million, indicating a decline from the prior-year quarter’s level of $463.1 million. This significant year-over-year decline can be attributed to lower refining crack spreads, with DK’s benchmark crack spreads decreasing approximately 49.2% during the period. However, the reported figure exceeded our prediction of $191.1 million.
Logistics: During the second quarter, the segment registered an adjusted EBITDA of $90.9 million compared with $69 million in the year-ago quarter. The figure also beat our projection of $83.8 million. This substantial growth can be attributed to the exceptional performance of the Midland Gathering system and the successful acquisition of 3 Bear Delaware.
Retail: The segment registered an adjusted EBITDA of $15 million during the reported quarter compared with $12.5 million in the year-ago period. The figure beat our projection of $6.2 million.
Higher fuel volume, higher average fuel margins and higher in-store sales were the main drivers of the increase.
Merchandise sales of $84.3 million outpaced the year-ago quarter’s reported figure of $83.4 million. The figure missed our estimate by 3.7%. The merchandise margin of 0.3% declined from 34% recorded in the year-ago period.
DK’s retail stations sold 45,687 thousand gallons of gasoline compared with 44,911 in the comparable period of 2022.
Financials
Total operating expenses in the second quarter decreased about 24.5% to $4.1 billion from the prior-year period’s level. Delek US spent $253.3 million on capital programs (about 70% on the Refining segment) in the same time frame.
As of Jun 30, 2023, the company had cash and cash equivalents worth $821.6 million and long-term debt of $2.8 billion, with debt to total capital of about 72.6%.
Guidance
For full-year 2023, DK expects capital expenditures of approximately $350 million. It plans to spend $202 million on Refining, $81 million on Logistics, $31 million on Retail and $36 million on Corporate/Other.
For the third quarter, DK anticipates operating costs in the range of $210-$220 million, general and administrative expenses in the band of $65-$70 million, and depreciation and amortization costs between $85 and $90 million. It also projects net interest expenses in the $80-$85 million range.
Zacks Rank and Key Picks
Currently, DK carries a Zacks Rank #3 (Hold).
Some better-ranked stocks for investors interested in the energy sector are CVR Energy CVI, sporting a Zacks Rank #1 (Strong Buy), and Evolution Petroleum EPM and Archrock AROC, both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
CVR Energy (CVI) is valued at around $3.67 billion. In the past year, its shares have risen 19.5%.
CVI currently pays a dividend of $2 per share, or 5.47% on an annual basis. Its payout ratio currently sits at 30% of earnings.
Evolution Petroleum is worth approximately $320.71 million. EPM currently pays a dividend of 48 cents per share, or 4.98% on an annual basis.
The company currently has a forward P/E ratio of 8.93. In comparison, its industry has an average forward P/E of 14.60, which means EPM is trading at a discount to the group.
Archrock is valued at around $2.04 billion. It delivered an average earnings surprise of 15.08% for the last four quarters and its current dividend yield is 4.75%.
Archrock is a provider of natural gas contract compression services and aftermarket services of compression equipment.
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