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HollyFrontier (HFC) Q1 Earnings Beat, Refining Margins Down

Nilanjan Choudhury

U.S. refiner HollyFrontier Corp. HFC reported first-quarter 2019 net income per share (excluding special items) of 54 cents, beating the Zacks Consensus Estimate of 36 cents on strong performance from the company’s midstream unit.

However, the bottom line deteriorated from the year-ago period profit of 77 cents thanks to weaker refining margins and refinery maintenance.

Revenues of $3.9 billion surpassed the Zacks Consensus Estimate of $3.7 billion but fell 5.6% from the first-quarter 2018 sales of $4.1 billion.

HollyFrontier Corporation Price, Consensus and EPS Surprise


HollyFrontier Corporation Price, Consensus and EPS Surprise | HollyFrontier Corporation Quote

Segmental Information

Refining: Adjusted EBITDA from the Refining segment, which is the main contributor to HollyFrontier’s earnings, was $193.4 million. This reflected a slight decline from the year-ago quarter’s income of $200.9 million, thanks to marginally narrower gross margins, which edged down 1% to $12.74 per barrel.

Total refined product sales volumes averaged 423,030 barrels per day (bpd), down 9% from 465,520 bpd in the year-ago quarter due to an unplanned maintenance at the company’s El Dorado plant. Downtime as part of planned turnaround at Tulsa East facility also impacted volumes. Moreover, throughput decreased from 452,050 bpd in the year-ago quarter to 433,720 bpd. Meanwhile, capacity utilization was 87.6%, down from 90.9% in first-quarter 2018.

Lubricants and Specialty Products: The segment EBITDA totaled $20.4 million, lower than $41.7 million reported in the year-ago quarter on base oil market weakness. Product sales averaged 34,770 bpd, increasing from the prior-year level of 32,450 bpd. However, throughput fell 8.2% year over year to 19,800 bpd in the reported quarter.

HEP: This unit includes HollyFrontier’s 57% interest in Holly Energy Partners L.P. HEP, a publicly-traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.

Segment EBITDA was $93.5 million, up from $88.5 million in first-quarter 2018. Earnings were buoyed by the buyouts of SLC and Frontier pipelines.

Balance Sheet

As of Mar 31, 2019, HollyFrontier had approximately $496.1 million in cash and cash equivalents, and $2.4 billion in net long-term debt, representing a debt-to-capitalization ratio of 26.9%.

During the quarter, the company paid $56.8 million in dividends and bought back shares worth $77.8 million.

Zacks Rank & Key Picks

HollyFrontier holds a Zacks Rank #3 (Hold).

Meanwhile, investors interested in the the energy space could look at some better options like ProPetro Holding Corp. PUMP and Parsley Energy PE that sport a Zacks Rank #2 (Buy).

The 2019 Zacks Consensus Estimate for Midland, TX-based ProPetro is $2.53, representing some 26.5% earnings per share growth over 2018. Next year’s average forecast is $2.79 pointing to another 10.6% growth.

The 2019 Zacks Consensus Estimate for Austin, TX-based Parsley is $1,55, representing some 9.9% earnings per share growth over 2018. Next year’s average forecast is $2.48 pointing to another 59.8% growth.

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