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Why PBF Energy (PBF) Stock Up 17.8% Despite Q1 Earnings Miss

Zacks Equity Research

Despite the announcement of weak first-quarter earnings on May 15, PBF Energy Inc. PBF has seen a 17.8% rise in share price. The refining market outlook seems bearish at the moment, thanks to demand destruction caused by coronavirus-induced lockdowns and travel bans. However, PBF Energy is acting accordingly and has taken several measures to navigate through the current market uncertainty. Notably, it expects 2020 capital expenditures to be down more than $350 million from its original guidance.

Weak Q1 Earnings

PBF Energy reported first-quarter 2020 loss of $1.19 a share, wider than the Zacks Consensus Estimate of a loss of $1.09 and the year-ago quarter’s loss of $1.18.

Total revenues increased to $5,277.5 million from $5,216.2 million in the prior-year quarter. Moreover, the top line beat the Zacks Consensus Estimate of $4,898 million.  

The weak quarterly earnings can be attributed to huge loss at the Refining business, and higher costs and expenses. A decline in realized refining margin per barrel of throughput in the West Coast and Mid-Continent affected profits. This was partially offset by higher crude oil and feedstock throughput volumes, as well as increased refining margin per barrel in the Gulf and East Coasts.

PBF Energy Inc. Price, Consensus and EPS Surprise

PBF Energy Inc. Price, Consensus and EPS Surprise

PBF Energy Inc. price-consensus-eps-surprise-chart | PBF Energy Inc. Quote

Segmental Performance

Operating loss at the Refining segment was $1,386.4 million against a profit of $389.5 million a year ago.

The company generated a profit of $47.7 million from the Logistics segment, which reflects an improvement from the prior-year quarter’s $34.2 million.

Throughput Analysis

Volumes:

In the quarter under review, crude oil and feedstocks throughput volumes were 852.9 thousand barrels per day (bpd), higher than the year-ago figure of 743.1 thousand bpd.

The East Coast, Mid-Continent, Gulf Coast and West Coast regions accounted for 38.5%, 10.6%, 20.5% and 30.4%, 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 $6.60, higher than the year-earlier quarter’s $6.38.

Refining margin per barrel of throughput was $6.92 in the East Coast, up from $3.35 in the year-earlier quarter. Realized refining margin was $8.07 per barrel in the Gulf Coast, up from $3.33 in the prior-year quarter. However, the metric was $7.09 per barrel in the West Coast, down from $10.76 a year ago. Also, the metric was $1.16 a barrel in the Mid-Continent, much lower than $12.28 a year ago.

Refinery operating expense per barrel of throughput was $6.54, lower than $6.78 in the year-ago quarter.

Costs & Expenses

Total costs and expenses in the reported quarter were $6,644.3 million, significantly higher than $4,851.6 million in the year-ago period. Cost of sales — which includes operating expenses, cost of products and others — amounted to $6,611.7 million, higher than the year-ago level of $4,791.2 million. General and administrative expenses rose to $82.5 million from $57.6 million in the year-ago period.

Capital Expenditure & Balance Sheet

Through the first quarter, the company spent $1,304.1 million capital on refining operations and $6.1 million on logistics businesses.

At the end of the quarter, it had cash and cash equivalents of $722.1 million, down from the fourth-quarter level of $814.9 million. As of Mar 31, it had a total debt of $3,546.1 million, up from the fourth quarter’s $2,064.9 million. This resulted in total debt to capitalization of 59%. 

Guidance

Coronavirus-induced lockdowns and travel bans have destroyed demand for energy. As such, the company reduced crude oil processing in refineries starting from March-end through early April. It has idled several units in different refineries as a temporary measure to navigate through the current market uncertainties. Moreover, the refineries are currently running at minimum rates, resulting in a throughput reduction of around 30% from prior expectations.

Near-term throughput volumes will likely be in the range of 650,000-750,000 barrels. The company expects 2020 operating expenses to be down $140 million from the original budget. It expects capital expenditures to be down more than $350 million from its original 2020 guidance. The company has suspended quarterly dividend payout of 30 cents per share, which will likely lead to savings of around $35 million per quarter.

Zacks Rank & Stocks to Consider

Currently, PBF Energy has a Zacks Rank #4 (Sell). Some better-ranked players in the energy space include EnLink Midstream LLC ENLC, CNX Resources Corporation CNX and Comstock Resources, Inc. CRK, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

EnLink Midstream’s 2020 earnings per share are expected to rise 97.9% year over year.

CNX Resources beat earnings estimates thrice and met once in the last four quarters, with average positive surprise of 111.5%.

Comstock Resources’ 2020 sales are expected to gain 32.7% year over year.

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