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Why Is PBF Energy (PBF) Up 11.6% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for PBF Energy (PBF). Shares have added about 11.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is PBF Energy due for a pullback? 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.

PBF Energy Misses Q2 Earnings Estimates on Low Throughput Volumes

PBF Energy reported second-quarter 2020 loss of $3.19 per share, wider than the Zacks Consensus Estimate of a loss of $3.03. The company reported earnings of 83 cents per share in the year-ago quarter.

Total revenues decreased to $2,515.8 million from $6,560 million in the prior-year quarter. Moreover, the top line missed the Zacks Consensus Estimate of $3,860 million.  

The weak quarterly results can be attributed to lower crude oil and feedstock throughput volumes, decreased gross refining margin, as well as increased refinery operating expense.

Segmental Performance

Operating income at the Refining segment was $614.6 million, up from $23.7 million a year ago.

The company generated a profit of $50.1 million from the Logistics segment, which reflects an improvement from the prior-year quarter’s $37.8 million.

Throughput Analysis

Volumes:

For the quarter under review, crude oil and feedstocks throughput volumes were 675.1 thousand barrels per day (bpd), lower than the year-ago figure of 854.1 thousand bpd.

The East Coast, Mid-Continent, Gulf Coast and West Coast regions accounted for 35.9%, 11.4%, 19.6% and 33.1%, respectively, of the total oil and feedstock throughput volume. 

Margins:

Company-wide gross refining margin per barrel of throughput — excluding special items — was recorded at $1.54, significantly lower than the year-earlier quarter’s $9.10.

Refining margin per barrel of throughput was $3.51 in the East Coast, down from $4.18 in the year-earlier quarter. Realized refining margin was $3.99 per barrel in the Gulf Coast, down from $5.61 in the prior-year quarter. Moreover, the metric was 5 cents per barrel in the West Coast, down from $17.51 a year ago. Also, the metric was negative $4.63 per barrel in the Mid-Continent against positive $14.87 a year ago.

Refinery operating expense per barrel of throughput was $6.90, higher than $5.27 in the year-ago quarter.

Costs & Expenses

Total costs and expenses for the reported quarter were $1,895 million, significantly lower than $6,550.5 million in the year-ago period. Cost of sales — which includes operating expenses, cost of products and others — amounted to $2,317.5 million, lower than the year-ago level of $6,493.2 million. General and administrative expenses rose to $57.9 million from $53.6 million in the year-ago period.

Capital Expenditure & Balance Sheet

Through the second quarter, the company spent $143.8 million capital on refining operations and $1.8 million on logistics businesses.

At quarter-end, it had cash and cash equivalents of $1,225.2 million, up from the first-quarter level of $722.1 million. As of Jun 30, it had a total debt of $4,092.8 million, up from the first quarter’s $3,546.1 million. This resulted in total debt to capitalization of 59%. Moreover, as of July 2020, the company had more than $700 million available under the revolving credit facility.

Guidance

Coronavirus-induced lockdowns and travel bans have destroyed the demand for energy. As such, the company reduced crude oil processing in refineries in the second quarter. It has idled several units in different refineries as a temporary measure to navigate through market uncertainties. Moreover, the refineries are currently running at reduced rates.

Near-term throughput volumes will likely be in the range of 700,000-800,000 barrels per day. It expects refining capital expenditures to be $360 million for 2020. Moreover, 2021 capital expenditure budget will likely be below the 2020 level.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -30.47% due to these changes.

VGM Scores

Currently, PBF Energy has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise PBF Energy has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.



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