Delek US Holdings, Inc.

The retreat of the crack spreads has caused havoc among the refining stocks. Delek US Holdings, Inc. ( DK - Snapshot Report ) faces headwinds in 2012 as that spread comes back to earth. But this Zacks #1 Rank (Strong Buy) is still cheap, with a forward P/E of 6.9.

Delek US Holdings is an independent refiner with refineries in Tyler, Texas and El Dorado Arkansas producing 140,000 barrels a day. The company also owns 3 terminals in Texas and 7 product pipelines running for about 114 miles between its refined product terminals in Abilene and San Angelo, Texas.

The company also operates 377 retail stores in 7 states under several brands including MAPCO Express, MAPCO Mart, East Coast, Fast Food and Fuel, Delta Express, Discount Food Mart and Favorite Markets, which sell gasoline and convenience store merchandise.

Delek Beat by 59% in the Fourth Quarter

On Mar 7, Delek reported its fourth quarter results and surprised on the Zacks Consensus by 10 cents. The company saw a loss of 7 cents compared to the consensus which expected a loss of 17 cents per share.

Delek had warned about the narrowing in crude oil differentials and a decline in regional asphalt prices as early as January. So the fourth quarter loss was not surprising.

The per barrel discount of West Texas Intermediate (WTI) to Louisiana Light Sweet (LLS) fell from $25/bbl in October to just $10/bbl in December.

In the retail segment, same-store merchandise sales rose 2% in the quarter compared to a year ago. It was boosted by food service sales which jumped 17.4% as Delek focused on increasing the fresh food QSR concept in more stores.

Optimism About 2012

Despite the contraction in the spreads, the business isn't all doom and gloom in 2012 however.

"During the first quarter 2012, Mid-Continent and Gulf Coast refining economics have improved when compared to the prior-year period, providing a solid start to what could be another strong year," said Uzi Yemen, President and CEO.

Zacks Consensus Estimates Move Higher

Analysts like the direction of things as 2 estimates moved higher for 2012 in the last 30 days.

This pushed the Zacks Consensus Estimate up to $2.14 from $1.91 in that time.

However, that is still an earnings decline of 24% from 2011 which was a strong year due to the high spreads.

Special Dividend Payout

On Mar 26, the company rewarded shareholders with its second special cash dividend in the last 6 months.

It will be paying $0.09 per share to shareholders of record on Apr 5, payable on Apr 19.

This is in addition to the regular dividend, currently yielding 1%.

Plenty of Value

Shares rallied in 2012 once the fear about declining spreads passed but there is still plenty of value.

In addition to a really low P/E, Delek has a price-to-book ratio of 1.3. A P/B under 3.0 usually means value.

It also has a really low price-to-sales ratio of 0.1. A P/S ratio under 1.0 can mean a company is undervalued.

The company has other solid fundamentals as well including a 1-year return on equity (ROE) of 26%.

The worst of the panic over the crude spreads has passed. Delek gets you in the game with attractive valuations and rising earnings estimates.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at traceyryniec.