A month has gone by since the last earnings report for HollyFrontier (HFC). Shares have lost about 14.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is HollyFrontier 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 drivers.
HollyFrontier Q1 Earnings & Revenues Top Estimates
HollyFrontier reported first-quarter 2019 net income per share (excluding special items) of 54 cents, beating the Zacks Consensus Estimate of 36 cents on strong performance from the company’s midstream unit.
However, the bottom line deteriorated from the year-ago period profit of 77 cents thanks to weaker refining margins and refinery maintenance.
Revenues of $3.9 billion surpassed the Zacks Consensus Estimate of $3.7 billion but fell 5.6% from the first-quarter 2018 sales of $4.1 billion.
Refining: Adjusted EBITDA from the Refining segment, which is the main contributor to HollyFrontier’s earnings, was $193.4 million. This reflected a slight decline from the year-ago quarter’s income of $200.9 million, thanks to marginally narrower gross margins, which edged down 1% to $12.74 per barrel.
Total refined product sales volumes averaged 423,030 barrels per day (bpd), down 9% from 465,520 bpd in the year-ago quarter due to an unplanned maintenance at the company’s El Dorado plant. Downtime as part of planned turnaround at Tulsa East facility also impacted volumes. Moreover, throughput decreased from 452,050 bpd in the year-ago quarter to 433,720 bpd. Meanwhile, capacity utilization was 87.6%, down from 90.9% in first-quarter 2018.
Lubricants and Specialty Products: The segment EBITDA totaled $20.4 million, lower than $41.7 million reported in the year-ago quarter on base oil market weakness. Product sales averaged 34,770 bpd, increasing from the prior-year level of 32,450 bpd. However, throughput fell 8.2% year over year to 19,800 bpd in the reported quarter.
HEP: This unit includes HollyFrontier’s 57% interest in Holly Energy Partners L.P., a publicly-traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.
Segment EBITDA was $93.5 million, up from $88.5 million in first-quarter 2018. Earnings were buoyed by the buyouts of SLC and Frontier pipelines.
As of Mar 31, 2019, HollyFrontier had approximately $496.1 million in cash and cash equivalents, and $2.4 billion in net long-term debt, representing a debt-to-capitalization ratio of 26.9%.
During the quarter, the company paid $56.8 million in dividends and bought back shares worth $77.8 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
At this time, HollyFrontier has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, HollyFrontier has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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