HollyFrontier (HFC) Q1 Earnings Surpass On Higher Margins

HollyFrontier Corporation (NYSE:HFC) reported first-quarter 2018 net income per share (excluding special items) of 77 cents, significantly above the Zacks Consensus Estimate of 37 cents. The better-than-anticipated results can be attributed to higher-than-expected refining margins and refined product sales. Notably, the refining margins in the quarter stood at $12.83 a barrel compared with the Zacks Consensus Estimate of $10.24 per barrel. The refined product sales volume also averaged higher at 465,520 barrels per day (bpd) compared with the Zacks Consensus Estimate of 438,000 bpd.

Further, the bottom line turned around from the year-ago period’s loss of 19 cents. Robust year-over-year results were driven by higher sales volume and stronger contribution across all its segments.

Revenues of $4,128.4 million surpassed the Zacks Consensus Estimate of $3,392 million. The top line also surged 34% from first-quarter 2017 sales of $3,080.5 million.

Segmental Information

Refining: Net income from the Refining segment, which is the main contributor to HollyFrontier’s earnings, was $309.3 million, reflecting a massive turnaround from the year-ago quarter’s loss of more than $94 million. The improvement reflects wider refinery gross margins, which jumped 70.2% to $12.83 per barrel.

Total refined product sales volume averaged 465,520 bpd, up 19.8% from 388,440 bpd in the year-ago quarter. Moreover, throughput increased from 405,360 bpd in the prior-year quarter to 452,050 bpd. Capacity utilization was 90.9%, up from 81.2% in first-quarter 2017.

Lubricants and Specialty Products: Income from the segment totaled $32.8 million, nominally higher than $32.3 million reported in the year-ago quarter. Product sales averaged 32,450 bpd, lower than the prior-year level of 35,940 bpd. Throughput came in at 21,850 bpd in the reported quarter.

HEP: This unit includes HollyFrontier’s 57% interest in Holly Energy Partners L.P. (NYSE:HEP) , a publicly-traded master limited partnership that owns, operates, develops, and acquires pipelines and other midstream assets.

Segment profitability was $64.4 million, up from $52.1 million in first-quarter 2017. Earnings were buoyed by higher volume growth in its Permian crude gathering system, along with the buyouts of SLC and Frontier pipelines.

Balance Sheet

As of Mar 31, 2018, HollyFrontier had approximately $781.5 million in cash and cash equivalents, and $2,382.8 million in net long-term debt, representing a debt-to-capitalization ratio of 27.9%.

During the quarter, the company paid $58.9 million in dividends and bought back shares worth $25.2 million.

Zacks Rank & Key Picks

Headquartered in Texas, HollyFrontier carries a Zacks Rank #3 (Hold).

Meanwhile, investors interested in the same industry may consider some better-ranked stocks like Delek US Holdings, Inc. (NYSE:DK) and Par Pacific Holdings, Inc. (NYSE:PARR) . While Delek sports a Zacks Rank #1 (Strong Buy), Par Pacific carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Delek’s 2018 earnings are anticipated to witness year-over-year growth of 151.6%.

Par Pacific surpassed earnings estimates in each of the trailing four quarters, delivering an average positive earnings surprise of 77.60%.

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