A month has gone by since the last earnings report for HollyFrontier (HFC). Shares have lost about 15% 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 its most recent earnings report in order to get a better handle on the important catalysts.
HollyFrontier Q2 Earnings & Revenues Top Estimates
HollyFrontier reported second-quarter 2019 net income per share (excluding special items) of $2.18, beating the Zacks Consensus Estimate of $1.67 and the year-ago adjusted profit of $1.45. The robust performance stemmed from stronger refining margins.
Revenues of $4.8 billion surpassed the Zacks Consensus Estimate of $4.6 billion and rose 7% from the second-quarter 2018 sales of $4.5 billion.
Refining: Adjusted EBITDA from the Refining segment, which is the main contributor to HollyFrontier’s earnings, was $556.1 million. This reflected a 44.5% increase from the year-ago quarter’s income of $384.8 million, thanks to wider gross margins, which was up 18.5% to $19.64 per barrel.
Total refined product sales volumes averaged 469,100 barrels per day (bpd), up 3.4% from 453,830 bpd in the year-ago quarter. However, throughput decreased from 490,200 bpd in the year-ago quarter to 484,890 bpd. Meanwhile, capacity utilization was 99.1%, down from 101.4% in second-quarter 2018.
Lubricants and Specialty Products: The segment EBITDA totaled $28.8 million, lower than $39.4 million reported in the year-ago quarter on base oil market weakness. Product sales averaged 34,660 bpd, increasing from the prior-year level of 31,000 bpd. However, throughput fell 8.7% year over year to 16,990 bpd in the reported quarter.
HEP: This unit includes HollyFrontier’s 57% 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 EBITDA was $88.6 million, up from $81.9 million in second-quarter 2018. Earnings were buoyed by strong crude gathering volumes.
As of Jun 30, HollyFrontier had approximately $914.6 million in cash and cash equivalents, and $2.4 billion in long-term debt, representing a debt-to-capitalization ratio of 27.1%.
During the quarter, the company paid $56.7 million in dividends and bought back shares worth $189.2 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
Currently, HollyFrontier has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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