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Bull of the Day: HollyFrontier Corporation (HFC)

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HollyFrontier Corporation (HFC - Free Report) , a Zacks Rank #1 (Strong Buy) is engaged in refining petroleum. It produces and markets gasoline, diesel, jet fuel, asphalt, heavy products and specialty lubricant products. HollyFrontier Corporation, formerly known as Holly Corporation, is headquartered in Dallas, Texas.

Recent Earnings Data

In its Q1 earnings report HFC crushed both the Zacks consensus earnings and revenue estimates as all segments beat expectations. Earnings grew to $0.77 from -$0.19 in the year ago quarter while revenues improved by +34%.  The company’s impressive results were due to expanding margins, lower operating expenses, and higher throughput.  Also, the Logistics, and Lubricants and Specialty segments performed better than anticipated.  Further, the company refined more barrels of oil per day than expected (466 million barrels per day vs the expected 444 million), and reduced its overall cost to produce each barrel ($5.69 vs expected $5.98). 

Management’s Take

According to George Damiris, President and CEO, “HollyFrontier's strong financial results reflect our ability to capitalize on the refining margins and crude spreads available during the first quarter. To date, crude spreads have been consistent, and we are optimistic about refining and lubricant margins going into the summer.”

Price and Earnings Consensus Graph

As you can see in the graph below, the big uptick in U.S. production starting in 2017 has been a huge tailwind for the company.

HollyFrontier Corporation Price and Consensus

HollyFrontier Corporation Price and Consensus | HollyFrontier Corporation Quote

Increasing Earnings Estimates

The table below shows that analyst earnings estimates have been consistently increasing over the past 90, 60, and 30 day intervals.

The improvement from the last 30 days is noticeable: Q2 from $1.40 to $1.63, Q3 improved from $1.85 to $2.13, FY 18 rose from $5.10 to $5.88, and FY 19 jumped up from $5.36 to $6.81. 

Bottom Line

As the U.S. continues to produce record breaking levels of oil production, there will be a need to have this commodity refined.  HollyFrontier’s ability to increase capacity, and reduce costs for production enable the company to produce impressive revenues.  Further, the Energy Information Administration (EIA) expects U.S. production to continue to increase through 2019 giving HFC a long term positive outlook. Along with the company’s strong outlook, it also pays a solid +1.83% annual dividend, and has about $154 million remaining it is share repurchase program.

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