Delek US (DK) Q3 Earnings and Revenues Surpass Estimates
Delek US Holdings, Inc. DK reported third-quarter 2023 adjusted net income of $2.02 per share, which beat the Zacks Consensus Estimate of $1.36. The bottom line also improved from the year-ago quarter’s level of 2 cents. The outperformance could be attributed to record contributions from the Logistics and Retail segments and decreased year-over-year expenses during the quarter.
Net revenues decreased 11.3% year over year to $4.2 billion. The figure, however, beat the consensus mark of $4 billion. Adjusted EBITDA came in at $345.1 million compared with $414 million in the year-ago period.
On Nov 1, 2023, DK’s board of directors approved a 2.1% increase in regular dividends, bringing the quarterly payout to 24 cents per share. The dividend will be paid out on Nov 20, 2023, to shareholders of record as of Nov 13, 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 $285.5 million, indicating a decline from the prior-year quarter’s level of $355.7 million. This significant year-over-year decline can be attributed to lower refining crack spreads, with DK’s benchmark crack spreads decreasing approximately 8.2% during the period. However, the reported figure exceeded our prediction of $177.9 million.
Logistics: During the third quarter, the segment registered an adjusted EBITDA of $96.5 million compared with $91.5 million in the year-ago quarter. The figure beat our projection of $91.7 million. This substantial growth can be attributed to the exceptional performance of the Midland Gathering and the Delaware Gathering systems, as well as annual rate increases.
Retail: The segment registered an adjusted EBITDA of $16.2 million during the reported quarter compared with $13.5 million in the year-ago period. The figure beat our projection of $10.1 million.
Higher fuel volume, higher average fuel margins and higher in-store sales were the main reasons behind the increase.
Merchandise sales of $83.5 million declined from the year-ago quarter’s reported figure of $84.2 million. The figure missed our estimate by 3.9%. The merchandise margin of 5.5% increased from 32.6% recorded in the year-ago period.
DK’s retail stations sold 43,170 thousand gallons of gasoline compared with 44,729 in the corresponding period of 2022.
Financials
Total operating expenses in the third quarter decreased about 14.2% year over year to $4.5 billion. Delek US spent $301.6 million on capital programs (about 65% on the Refining segment) in the same time frame.
As of Sep 30, 2023, the company had cash and cash equivalents worth $901.7 million and long-term debt of $2.6 billion, with debt to total capital of about 69.5%.
Guidance
For full year 2023, DK expects capital expenditures to be in the range of $380-$390 million.
For the fourth quarter, the company anticipates operating costs in the band of $210-$220 million, general and administrative expenses in the range of $65-$70 million, and depreciation and amortization costs between $90 million and $95 million. It also projects net interest expenses in the $80-$85 million range.
Zacks Rank and Other Key Picks
Currently, DK carries a Zacks Rank #2 (Buy).
Investors interested in the energy sector might look at some other top-ranked stocks like Liberty Energy Inc. LBRT and Oceaneering International, Inc. OII, each sporting a Zacks Rank #1 (Strong Buy), and USA Compression Partners, LP USAC, carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Liberty Energy is valued at $3.26 billion. LBRT currently pays a dividend of 20 cents per share, or 1.03% on an annual basis.
LBRT is a leading provider of hydraulic fracturing and other auxiliary services to North American onshore exploration and production companies.
USA Compression Partners is valued at around $2.58 billion. USAC currently pays a dividend of $2.10 per unit, or 8.01% on an annual basis.
USAC provides natural gas compression services. The company offers compression services to oil companies and independent producers, processors, gatherers, and transporters of natural gas and crude oil. It also operates stations.
Oceaneering International is worth approximately $2.17 billion. In the past year, its shares have risen 50.1%.
The company provides engineered services and products, and robotic solutions to the offshore energy, defense, aerospace, manufacturing and entertainment industries worldwide.
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