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HollyFrontier (HFC) Q4 Earnings Lag, Sales & Profit up Y/Y

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HollyFrontier Corporation HFC reported fourth-quarter 2017 net income per share (excluding special items) of 70 cents, below the Zacks Consensus Estimate of 82 cents. The weaker than anticipated results can be attributed to lower-than-expected refining margins. Notably, the refining margins in the quarter stood at $12.54 a barrel against the Zacks Consensus Estimate of $13.15 a barrel.

However, the bottom line turned around from the year-ago period’s loss of 6 cents.Robust year-over-year results were driven by higher sales volume and stronger contribution across all segments.

Revenues of $3,992.7 million missed the Zacks Consensus Estimate of $4,310 million. However, the top line surged 35.1% from the fourth-quarter 2016 sales of $2,955.1 million.

HollyFrontier Corporation Price, Consensus and EPS Surprise

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

Segmental Information

Refining: Net income from the Refining segment, which is the main contributor to HollyFrontier’s earnings, was $282.3 million, surging a whopping 475.5% from the year-ago income of $49 million. The improvement reflects wider gross margins, which jumped 85.2% to $12.54 per barrel.

Total refined product sales volume averaged 482,860 barrels per day (bpd), up 3.5% from 464,160 bpd in the year-ago quarter. Moreover, throughput increased from 497,450 bpd in the prior-year quarter to 466,640 bpd. Capacity utilization was 100.9%, up from 94.5% in fourth-quarter 2016.

Lubricants and Specialty Products: Income from the segment, totaled $29.3 million, up from $20.6 million reported in the year-ago quarter. Product sales averaged 29,670 bpd, significantly above the prior-year level of 11,230 bpd. Throughput came in at 20,990 bpd in the reported quarter.

HEP: This unit includes HollyFrontier’s 36% 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 profitability was $67.6 million, up from $54.9 million in fourth-quarter 2016. Earnings were buoyed by higher segment sales.

Balance Sheet

As of Dec 31, 2017, HollyFrontier had approximately $630.8 million in cash and cash equivalents, and $2,498.9 million in net long-term debt, representing a debt-to-capitalization ratio of 29.8%.

Zacks Rank & Other Key Picks

Headquartered in Texas, HollyFrontier carries a Zacks Rank #2 (Buy).

Meanwhile, investors interested in the same sector may also consider Marathon Petroleum Corp. MPC and Murphy USA Inc. MUSA. While Marathon Petroleum sports a Zacks Rank #1 (Strong Buy), Murphy USA carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Marathon Petroleum delivered an average positive earnings surprise of 182.62% in the trailing four quarters.

Murphy USA delivered an average positive earnings surprise of 20.65% in the trailing four quarters.

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