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HollyFrontier (HFC) Down 0.9% Since Last Earnings Report: Can It Rebound?

·3 min read

A month has gone by since the last earnings report for HollyFrontier (HFC). Shares have lost about 0.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is HollyFrontier due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

HollyFrontier’s Q1 Loss Wider Than Expected, Sales Beat

U.S. refiner HollyFrontier reported first-quarter 2021 net loss per share (excluding special items) of 53 cents, wider than the Zacks Consensus Estimate of a loss of 45 cents. In the year-ago period, the company earned 53 cents per share.

The underperformance reflects a decline in refining margins and throughput, partially offset by robust results from the lubricants and the pipeline divisions.

Revenues of $3.5 billion beat the Zacks Consensus Estimate of $2.8 billion and improved 3.1% from first-quarter 2020 sales of $3.4 billion.

Segmental Information

Refining: Adjusted loss from the Refining segment, which is the main contributor to HollyFrontier’s earnings, was $65.8 million. This reflected a massive plunge from the year-ago quarter’s income of $175.9 million, primarily due to sharply narrower gross margins, which were down 28% to $8 per barrel. On a somewhat positive note, margins came above the Zacks Consensus Estimate of $6.88 per barrel.

Total refined product sales volumes averaged 354,940 barrels per day (bpd), down 13.4% from 409,850 bpd in the year-ago quarter. Moreover, throughput decreased from 425,260 bpd in the year-ago quarter to 374,160 bpd and fell short of the Zacks Consensus Estimate of 395,000 bpd. Meanwhile, capacity utilization was 86%, down from 96.9% in first-quarter 2020.

Lubricants and Specialty Products: The segment EBITDA totaled $87.1 million, compared to $32.3 million reported in the year-ago quarter, primarily reflecting a strong base oil market. Product sales averaged 32,570 bpd, decreasing from the prior-year level of 36,800 bpd. Throughput was also down 6.2% year over year to 20,410 bpd in the reported quarter.

HEP: This unit includes HollyFrontier’s majority interest in Holly Energy Partners L.P. , a publicly-traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.

Segment EBITDA was $96.2 million, up from $64.4 million in first-quarter 2020. Earnings were buoyed by minimum volume commitments.

Balance Sheet

As of Mar 31, HollyFrontier had approximately $1.2 billion in cash and cash equivalents, and $3.1 billion in long-term debt, representing a debt-to-capitalization of 34.9%.

During the quarter, the company paid $57.7 million in dividends.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 75.23% due to these changes.

VGM Scores

Currently, HollyFrontier has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, HollyFrontier has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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