HollyFrontier Misses Consensus on 4th-Quarter Earnings
- By Alberto Abaterusso
HollyFrontier Corp. ( NYSE:HFC ) saw a boost in its fourth-quarter results compared to the prior-year quarter. The oil and gas refiner closed the quarter with adjusted earnings per share of 70 cents, a major improvement from the year-prior quarter, equalling an adjusted net income of $124.6 million.
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The company attributed the improvement to higher sales per barrel and higher refining margins. Earnings from Petro-Canada Lubricants, which was acquired by HollyFrontier for $862.1 million, also significantly contributed to the bottom line.
Despite increases as compared to 2016, when the refiner reported a loss of 6 cents, HollyFrontier missed consensus by 13 cents. The miss generated a negative surprise of 15.7%.
Source: Yahoo Finance
The company's revenue for the quarter came in at $3.99 billion, beating consensus by $230 million and increasing 35.1% from the prior-year quarter.
The refinery gross margin, on a consolidated basis, increased 85% from $6.77 per produced barrel in third-quarter 2016 to $12.54 per produced barrel in third-quarter 2017. Refining operating expenses were $5.96 per produced barrel sold versus $5.62 per produced barrel sold in the comparable quarter of 2016. The net operating margin was $6.58 per produced barrel, a more than 470% increase from $1.15 per produced barrel in the same quarter of 2016.
President and CEO George Damiris commented on the company's performance. "In comparison to last year, HollyFrontier's significant financial improvement for the fourth quarter reflects both better refinery operations and the improved macroeconomic environment. Additionally, Lubricants and Specialty Products had a strong fourth quarter led by the Rack Forward Business."
The company's refinery throughput was 497,450 consolidated barrels per day during the fourth quarter, an improvement from 466,640 barrels per day in the comparable quarter of 2016. The refiner sold 482,860 barrels (of produced product) per day, up from 464,160 barrels per day in the prior-year quarter. The rate of refinery utilization increased to 100.9% in the fourth-quarter of 2017 versus a rate of 94.5% in the comparable of 2016.
The company's total operating costs and expenses increased 27.8% on a year-over-year basis, from $2.84 billion to $3.63 billion.
The company closed the quarter with $630.8 million in cash on hand and securities and $2.5 billion in consolidated long-term debt. The total long-term debt-to-equity ratio is 43.4%.
HollyFrontier is at $44.41 per share with a price-book (P/B) ratio of 1.33 (versus an industry median of 1.73 times), a price-sales (P/S) ratio of 0.55 (versus an industry median of 0.42 times) and a price-earnings (P/E) ratio of 9.78 times (versus an industry median of 12.50 times). The P/E ratio of HollyFrontier has been calculated according to the most recent share price of the stock on the New York Stock Exchange and a full fiscal 2017 net profit of $4.54 per ordinary share. The forward P/E ratio is according to GuruFocus 12.36 times versus an industry median of 12.14 times. When the forward P/E ratio is multiplied by an EPS of $3.75 - a forecast for full fiscal 2018 - it yields a value of $46.35, which represents a 4.4% upside in the current market valuation.
The company pays an annual dividend of $1.32 per share through quarterly payments of 33 cents. The forward dividend yield is 2.87% versus an industry median of 4.29%.
HollyFrontier has an average target price of $50.27, which represents a 40.60% from the price target of three months ago ($35.50 average per share) and a 13.2% upside from the current market valuation. The target price is a mean of 15 estimates, ranging between a low of $40 per share and a high of $61 per share. The recommendation rating is 2.9 out of 5.
In Damiris' comments on results for 2017, some catalysts to watch are highlighted: "We are excited about 2018 based on our improving refinery reliability, our positive outlook for both product cracks and crude spreads, as well as the growth potential of converting a higher percentage of base oil sales into finished products."
The company is reporting a volume of 176.27 shares outstanding on a basic basis, and a volume of 177.46 shares outstanding on a diluted basis. According to GuruFocus, institutions owns about 78.60% of the company's shares outstanding while insiders hold about 1.66%.
Among the top shareholders of the company, it is worth to mentioned that Blackrock Inc. has 12.20% ownership in HollyFrontier, the Vanguard Group, Inc. (The) has 10.25% and TCTC Holdings, LLC holds 7.88% of the refiner's total shares outstanding. These figures on holdings are as of Dec. 30, 2017.
(Disclosure:I have no positions neither in HollyFrontier nor in any other company that operates in the same industry of HollyFrontier.)
This article first appeared on GuruFocus.
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