Why Is Delek US Holdings (DK) Down 1.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Delek US Holdings (DK). Shares have lost about 1.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Delek US Holdings due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Delek Posts Wider-Than-Expected Q1 Loss, Sales Top Estimates
Delek US Holdings reported an adjusted loss of $1.69 a share, wider than the Zacks Consensus Estimate of a loss of $1.38 as well as the year-ago quarterly loss of 30 cents. This underperformance was due to weak contribution from the refining segment.
However, quarterly revenues of $2.39 billion compared favorably with the year-ago sales of $1.82 billion and surpassed the Zacks Consensus Estimate of $1.64 billion. This better-than-expected report was driven by a strong contribution from the logistics segment and a tight leash on operating expenses.
Segmental Performance
Refining: The company reported a negative margin of $21.2 million for this segment narrower than the negative $290.4 million in the year-ago quarter. However, adjusted margins of -$56.8 million worsened from -$23.1 million in the year-ago period. Results were hurt by a Winter Storm Uri which caused a reduction in throughput as well as an increase in energy costs.
Logistics: This unit represents the company’s majority interest in Delek Logistics Partners, L.P. (DKL), a publicly-traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets. Margin from the Logistics unit was $57.7 million, up 22% from $47.3 million in the year-ago period, led by divesting the Big Spring Gathering business and Trucking Assets.
Retail: Margin for the unit, formed from the acquisition of Alon USA Energy in 2017, rose 37.4% to $16.9 million from the year-earlier quarter’s level of $12.3 million due to higher Retail fuel margin. Delek’s merchandise sales of $74.6 million with a margin of 32.7%, on average, compared favorably with $71.7 million sales carrying a margin of 31.6%, on average, in the prior year. Its retail fuel gallons sale totaled $39.8 million in the March quarter of 2021, the average margin being 35 cents per gallon. This compared unfavorably with $48 million sale, the average margin being 31 cents in first-quarter 2020.
Financials
Total operating expenses incurred in the quarter decreased 13.3% from the prior-year period to $2,472.3 million.
In the reported quarter, Delek spent $67 million on capital programs (86.3% on the Refining segment). As of Mar 31, 2021, the company had cash and cash equivalents worth $793.5 million and a long-term debt of $2,354.4 million with the total debt to total capital of 69.6%.
Guidance
Delek projects its second-quarter 2021 toal operating expenses in the 140-$150 miliion band while total crude throughput is estimated in the 270,000-280,000 barrels per day range. Delek anticipates its 2021 capital expenses to be around $175-$185 million, comprising turnarounds.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 44.68% due to these changes.
VGM Scores
At this time, Delek US Holdings has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Delek US Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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