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HollyFrontier (HFC) Q2 Earnings Beat, Refining Margins Rise

Zacks Equity Research

U.S. refiner HollyFrontier Corp. HFC reported second-quarter 2019 net income per share (excluding special items) of $2.18, beating the Zacks Consensus Estimate of $1.67 and the year-ago adjusted profit of $1.45. The robust performance stemmed from stronger refining margins.

Revenues of $4.8 billion surpassed the Zacks Consensus Estimate of $4.6 billion and rose 7% from the second-quarter 2018 sales of $4.5 billion.

Segmental Information

Refining: Adjusted EBITDA from the Refining segment, which is the main contributor to HollyFrontier’s earnings, was $556.1 million. This reflected a 44.5% increase from the year-ago quarter’s income of $384.8 million, thanks to wider gross margins, which was up 18.5% to $19.64 per barrel.

Total refined product sales volumes averaged 469,100 barrels per day (bpd), up 3.4% from 453,830 bpd in the year-ago quarter. However, throughput decreased from 490,200 bpd in the year-ago quarter to 484,890 bpd. Meanwhile, capacity utilization was 99.1%, down from 101.4% in second-quarter 2018.

Lubricants and Specialty Products: The segment EBITDA totaled $28.8 million, lower than $39.4 million reported in the year-ago quarter on base oil market weakness. Product sales averaged 34,660 bpd, increasing from the prior-year level of 31,000 bpd. However, throughput fell 8.7% year over year to 16,990 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 $88.6 million, up from $81.9 million in second-quarter 2018. Earnings were buoyed by strong crude gathering volumes.

HollyFrontier Corporation Price, Consensus and EPS Surprise

 

HollyFrontier Corporation Price, Consensus and EPS Surprise

HollyFrontier Corporation price-consensus-eps-surprise-chart | HollyFrontier Corporation Quote

Balance Sheet

As of Jun 30, HollyFrontier had approximately $914.6 million in cash and cash equivalents, and $2.4 billion in long-term debt, representing a debt-to-capitalization ratio of 27.1%.

During the quarter, the company paid $56.7 million in dividends and bought back shares worth $189.2 million.

Zacks Rank & Stock Picks

HollyFrontier holds a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space are TC Energy Corporation TRP, Enbridge Inc. ENB and Cheniere Energy, Inc. LNG. All the companies carry a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Canada-based TC Energy has an excellent track of outperforming estimates over the last four quarters at an average rate of 14.8%.

Enbridge, also headquartered in Canada, has an excellent track of outperforming/meeting estimates over the last four quarters at an average rate of 18.5%.

Cheniere Energy’s expected EPS growth rate for three to five years currently stands at 31.1%, comparing favorably with the industry’s growth rate of 14.3%.

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