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Delek US Holdings (DK) Down 16.3% 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 16.3% 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 catalysts.

Delek Q3 Earnings Beat, Reveneus Miss Estimates

Delek US Holdings, Inc. delivered a comprehensive earnings beat in the third quarter of 2019. Notably, robust contribution from the retail and logistics segments boosted its results. The company posted adjusted net income per share of 78 cents, comfortably surpassing the Zacks Consensus Estimate of 68 cents. However, the same fell from the year-ago income of $2.15 per share due to weak contribution from the refining segment.

Quarterly revenues of $2,334.3 million missed the Zacks Consensus Estimate of $2,578 million. The top line also compared unfavorably with the year-ago sales of $2,768.9 million.

Segmental Performance

Refining: Margin from the Refining segment was $127.5 million, down 60% from $319.5 million in the year-ago quarter. The segment’s results were negatively impacted by lower crude differential environment and planned downtime at El Dorado.

Logistics: This unit includes Delek’s 63% interest in Delek Logistics Partners, L.P. (DKL), a publicly-traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets. Margin from the Logistics unit was $46.6 million, up 8.12% from $43.1 million in the year-ago period owing to strong operations in the Paline Pipeline and SALA gathering system, partially offset by a lower gross margin in west Texas.

Retail: Margin for the unit — formed following the acquisition of Alon USA Energy in 2017 — improved 21.6% to $18.6 million from the year-earlier quarter on higher margins and fuel gallons sales. Delek’s merchandise sales came in at $81.5 million with average margin of 30.5% compared with $89.7 million with average margin of 31.3% in the prior year. Its retail fuel gallons sale totaled 54.9 million with average margin of 31 cents per gallon compared with 56 million sale at average margin of 23 cents in third-quarter 2018.

Financials

Total expenses incurred in the quarter declined 10.6% from the prior-year period to $2,246.9 million.

In the reported quarter, Delek spent $110.5 million on capital programs (57.3% on the Refining segment). As of Sep 30, the company had cash and cash equivalents of $1,006.4 million and long-term debt of $1,935.4 million with a debt-to-capitalization ratio of 50.9%.

Delek bought back shares worth $43 million in the third quarter. It is expected to repurchase additional $30 million shares in the fourth.

The company declared a quarterly dividend of 30 cents per share, marking a 3.5% sequential hike. The dividend will be payable Dec 2 to its shareholders of record as of Nov 18.

Guidance

For the fourth quarter, Delek projects its consolidated operating as well as G&A expenses in the range of $165-$175 million and $65-$70 million, respectively.

Total crude throughput for the current quarter is expected between 275,000 and 280,000.

Delek anticipates its full-year capital expenditure guidance to be $414.9 million.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

Currently, Delek US Holdings has a nice Growth Score of B, 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 20% 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 upward for the stock, and the magnitude of these revisions has been net zero. Notably, Delek US Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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