Shares of Delek US Holdings (DK) have been strong performers lately, with the stock up 16.5% over the past month. The stock hit a new 52-week high of $29.47 in the previous session. Delek US Holdings has gained 91.2% since the start of the year compared to the 29.5% move for the Zacks Oils-Energy sector and the 29.7% return for the Zacks Oil and Gas - Refining and Marketing industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on May 3, 2022, Delek US Holdings reported EPS of $0.58 versus consensus estimate of $-0.14 while it beat the consensus revenue estimate by 57.46%.
For the current fiscal year, Delek US Holdings is expected to post earnings of $3.32 per share on $16.56 billion in revenues. This represents a 209.57% change in EPS on a 55.54% change in revenues. For the next fiscal year, the company is expected to earn $2.16 per share on $14.11 billion in revenues. This represents a year-over-year change of -34.79% and -14.79%, respectively.
Delek US Holdings may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Delek US Holdings has a Value Score of B. The stock's Growth and Momentum Scores are A and B, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 8.6X current fiscal year EPS estimates, which is not in-line with the peer industry average of 9.6X. On a trailing cash flow basis, the stock currently trades at 54.3X versus its peer group's average of 9.8X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Delek US Holdings currently has a Zacks Rank of #1 (Strong Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Delek US Holdings fits the bill. Thus, it seems as though Delek US Holdings shares could have potential in the weeks and months to come.
How Does DK Stack Up to the Competition?
Shares of DK have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is TotalEnergies SE Sponsored ADR (TTE). TTE has a Zacks Rank of # 1 (Strong Buy) and a Value Score of A, a Growth Score of A, and a Momentum Score of A.
Earnings were strong last quarter. TotalEnergies SE Sponsored ADR beat our consensus estimate by 21.86%, and for the current fiscal year, TTE is expected to post earnings of $11.62 per share on revenue of $218.9 billion.
Shares of TotalEnergies SE Sponsored ADR have gained 6.9% over the past month, and currently trade at a forward P/E of 4.68X and a P/CF of 4.38X.
The Oil and Gas - Refining and Marketing industry is in the top 9% of all the industries we have in our universe, so it looks like there are some nice tailwinds for DK and TTE, even beyond their own solid fundamental situation.
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