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Delek US Holdings (DK) Down 19.5% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Delek US Holdings (DK - Free Report) . Shares have lost about 19.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Delek US Holdings 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.
Delek Q3 Earnings Lag Estimates, Sales Beat
Delek US Holdings reported a third-quarter 2022 adjusted net income of 2 cents per share, underperforming the Zacks Consensus Estimate of 31 cents and also lower than the year-earlier profit of 13 cents. The underperformance could be attributed to unfavorable inventory valuation impacts.
The diversified downstream energy company said that its adjusted EBITDA was $135.8 million compared with $101.9 million in the year-earlier period.
Meanwhile, Delek’s revenues of $5.3 billion surged 80.1% year over year and beat the consensus mark by $1.25 billion, primarily due to soaring sales from its key Refining segment. Revenues from the unit came in at almost $4 billion, up 53.2% from the third quarter of 2021 and 21.2% more than the Zacks Consensus Estimate.
In good news for investors, DK’s board of directors approved an increase of 1 cent per share in the regular dividend, bringing the quarterly dividend to 21 cents per share. The dividend will be paid out on Dec 2, 2022 to shareholders of record on Nov 18, 2022.
Inside DK’s Segments
Refining: The segment’s contribution margin (the refining margin minus operating expenses) increased from $82.1 million in the third quarter of 2021 to $106 million. However, the same lagged the Zacks Consensus Estimate of $317 million.
On a year-over-year basis, the refining segment’s results were negatively impacted by $225.1 million of inventory valuation impacts in the third quarter of 2022 compared with a $2.7 million unfavorable impact in the third quarter of 2021.
In the third quarter of 2022, Delek’s benchmark crack spreads were up an average of about 79.3% from prior-year levels. However, the ongoing burden of the Renewable Fuel Standard program continues to negatively impact small refineries' ability to fully capture the crack spread.
Logistics: This unit represents Delek’s majority interest in Delek Logistics Partners, L.P., a publicly traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.
The Logistics unit’s margin of $90.5 million was higher than the year-ago period’s income of $66.9 million and beat the Zacks Consensus Estimate of $88 million. The segment benefited from robust refinery utilization and contributions from the 3Bear Energy acquisition.
Retail: In the third quarter of 2022, the Retail segment — formed by the acquisition of Alon USA Energy in 2017 — had a contribution margin of $17.4 million compared with $17.9 million a year ago. Further, the margin failed to match the consensus mark of $19.12 million.
Meanwhile, merchandise sales of $84.2 million were more than the third-quarter 2021 sales of $81.7 million and beat the Zacks Consensus Estimate by 6.6%. However, the merchandise margin of 32.6% worsened from 33.7% in the year-ago period.
In the third quarter, DK’s retail stations sold 44,729 thousand gallons of gasoline compared with 41,912 thousand gallons a year ago. There was a 6% rise in the retail fuel margin to 35 cents per gallon. However, these factors were more than offset by a lower store count (248 versus 250).
Cost, Balance Sheet
The company’s total operating costs and expenses were $5.27 billion in the third quarter of 2022, up 80.6% from the year-ago quarter. This rise was primarily due to the higher cost of sales, which surged 82.7%.
As of Sep 30, Delek US Holdings had cash and cash equivalents of $1.15 billion and long-term debt of $2.67 billion, with debt-to-total capital of about 67.5%.
Guidance
Delek projects the fourth-quarter 2022 crude oil throughput to average between 280,000 and 290,000 barrels per day or roughly 94% utilization at the midpoint.
For full-year 2022, the company expects capital expenditures of approximately $300 million. DK expects additional repurchases of approximately $75 to $100 million of its common stock in the fourth quarter of 2022.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted 20.66% due to these changes.
VGM Scores
At this time, Delek US Holdings has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, 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 A. 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 looks promising. Notably, Delek US Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Delek US Holdings is part of the Zacks Oil and Gas - Refining and Marketing industry. Over the past month, TotalEnergies SE Sponsored ADR (TTE - Free Report) , a stock from the same industry, has gained 4.9%. The company reported its results for the quarter ended September 2022 more than a month ago.
TotalEnergies SE Sponsored ADR reported revenues of $69.04 billion in the last reported quarter, representing a year-over-year change of +26.1%. EPS of $3.83 for the same period compares with $1.76 a year ago.
For the current quarter, TotalEnergies SE Sponsored ADR is expected to post earnings of $3.46 per share, indicating a change of +35.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -7.8% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for TotalEnergies SE Sponsored ADR. Also, the stock has a VGM Score of A.
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Delek US Holdings (DK) Down 19.5% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Delek US Holdings (DK - Free Report) . Shares have lost about 19.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Delek US Holdings 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.
Delek Q3 Earnings Lag Estimates, Sales Beat
Delek US Holdings reported a third-quarter 2022 adjusted net income of 2 cents per share, underperforming the Zacks Consensus Estimate of 31 cents and also lower than the year-earlier profit of 13 cents. The underperformance could be attributed to unfavorable inventory valuation impacts.
The diversified downstream energy company said that its adjusted EBITDA was $135.8 million compared with $101.9 million in the year-earlier period.
Meanwhile, Delek’s revenues of $5.3 billion surged 80.1% year over year and beat the consensus mark by $1.25 billion, primarily due to soaring sales from its key Refining segment. Revenues from the unit came in at almost $4 billion, up 53.2% from the third quarter of 2021 and 21.2% more than the Zacks Consensus Estimate.
In good news for investors, DK’s board of directors approved an increase of 1 cent per share in the regular dividend, bringing the quarterly dividend to 21 cents per share. The dividend will be paid out on Dec 2, 2022 to shareholders of record on Nov 18, 2022.
Inside DK’s Segments
Refining: The segment’s contribution margin (the refining margin minus operating expenses) increased from $82.1 million in the third quarter of 2021 to $106 million. However, the same lagged the Zacks Consensus Estimate of $317 million.
On a year-over-year basis, the refining segment’s results were negatively impacted by $225.1 million of inventory valuation impacts in the third quarter of 2022 compared with a $2.7 million unfavorable impact in the third quarter of 2021.
In the third quarter of 2022, Delek’s benchmark crack spreads were up an average of about 79.3% from prior-year levels. However, the ongoing burden of the Renewable Fuel Standard program continues to negatively impact small refineries' ability to fully capture the crack spread.
Logistics: This unit represents Delek’s majority interest in Delek Logistics Partners, L.P., a publicly traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.
The Logistics unit’s margin of $90.5 million was higher than the year-ago period’s income of $66.9 million and beat the Zacks Consensus Estimate of $88 million. The segment benefited from robust refinery utilization and contributions from the 3Bear Energy acquisition.
Retail: In the third quarter of 2022, the Retail segment — formed by the acquisition of Alon USA Energy in 2017 — had a contribution margin of $17.4 million compared with $17.9 million a year ago. Further, the margin failed to match the consensus mark of $19.12 million.
Meanwhile, merchandise sales of $84.2 million were more than the third-quarter 2021 sales of $81.7 million and beat the Zacks Consensus Estimate by 6.6%. However, the merchandise margin of 32.6% worsened from 33.7% in the year-ago period.
In the third quarter, DK’s retail stations sold 44,729 thousand gallons of gasoline compared with 41,912 thousand gallons a year ago. There was a 6% rise in the retail fuel margin to 35 cents per gallon. However, these factors were more than offset by a lower store count (248 versus 250).
Cost, Balance Sheet
The company’s total operating costs and expenses were $5.27 billion in the third quarter of 2022, up 80.6% from the year-ago quarter. This rise was primarily due to the higher cost of sales, which surged 82.7%.
As of Sep 30, Delek US Holdings had cash and cash equivalents of $1.15 billion and long-term debt of $2.67 billion, with debt-to-total capital of about 67.5%.
Guidance
Delek projects the fourth-quarter 2022 crude oil throughput to average between 280,000 and 290,000 barrels per day or roughly 94% utilization at the midpoint.
For full-year 2022, the company expects capital expenditures of approximately $300 million. DK expects additional repurchases of approximately $75 to $100 million of its common stock in the fourth quarter of 2022.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted 20.66% due to these changes.
VGM Scores
At this time, Delek US Holdings has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, 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 A. 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 looks promising. Notably, Delek US Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Delek US Holdings is part of the Zacks Oil and Gas - Refining and Marketing industry. Over the past month, TotalEnergies SE Sponsored ADR (TTE - Free Report) , a stock from the same industry, has gained 4.9%. The company reported its results for the quarter ended September 2022 more than a month ago.
TotalEnergies SE Sponsored ADR reported revenues of $69.04 billion in the last reported quarter, representing a year-over-year change of +26.1%. EPS of $3.83 for the same period compares with $1.76 a year ago.
For the current quarter, TotalEnergies SE Sponsored ADR is expected to post earnings of $3.46 per share, indicating a change of +35.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -7.8% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for TotalEnergies SE Sponsored ADR. Also, the stock has a VGM Score of A.