(Adds CEO and analyst comments, estimates, details on lubricants and specialty products unit, share movement)
By Nishara Karuvalli Pathikkal
May 2 (Reuters) - Dismal performance at HollyFrontier Corp's lubricants and specialty products unit outweighed the company's quarterly revenue and profit beat on Thursday, sending its shares down over 5 percent.
The unit that sells greases, waxes and white oils posted a surprise loss of $9.1 million in the first quarter, compared with Morgan Stanley's income estimate of $12 million. This is also against a $32.9 million income from the unit a year earlier.
The company said there was a weak demand for base oils, used for manufacturing products like lubricating greases and motor oils, in several of its markets in January and February due to oversupply.
Chief Executive Officer George Damiris said he expects the company's high-quality group 3 base oils and those oils in group 2 to get better margins over the next few years, while acknowledging their current weakness.
"The base oil market remains cyclically very weak. And particularly, we're seeing conditions in the group 3 markets that we haven't arguably ever seen before," Damiris said on a post earnings call with analysts.
HollyFrontier was among the biggest percentage decliners on the broader S&P Energy Index, which fell nearly 1.6 percent on plunging crude prices. Shares of the company fell 3.3 percent to $46.17 in mid-day trading.
The company beat analysts' estimates for revenue and profit, as refining margins did not fall as much as feared due to higher prices of Canadian crude and planned and unplanned maintenance at two of its larger refineries.
HollyFrontier joined bigger rivals Valero Energy and Phillips 66 in beating profit estimates at a time when analysts had largely expected poor performance from refiners due to higher prices of Canadian crude.
Its refinery gross margins marginally fell to $12.74 per barrel in the quarter, beating Morgan Stanley's $11.21 per barrel estimate.
"Given the strong refining performance and weaker lubes performance, we believe investors will likely question if growing lubes business is the right strategy in the current market environment," Credit Suisse analyst Manav Gupta said in a note.
Net income attributable to the company's shareholders fell 6 percent to $253.1 million in the quarter ended March 31. [http://bit.ly/2Y0V28C ]
Excluding items, the Dallas-based company posted a profit of 54 cents per share, beating the average analyst estimate of 43 cents per share, according to IBES data from Refinitiv.
Sales and other revenue of $3.90 billion beat analysts' estimates of $3.31 billion.
(Reporting by Nishara Karuvalli Pathikkal and Shanti S Nair in Bengaluru; Editing by James Emmanuel)