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Bull of the Day: CVR Refining (CVRR)

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CVR Refining , a Zacks Ranked #1 (Strong Buy) is engaged in the refining of petroleum primarily in the United States. It has refining and related logistics assets that operate in the mid-continent region. The company operates in Coffeyville, Kansas, Wynnewood and Oklahoma. CVR Refining, LP is headquartered in Sugar Land, Texas.

Recent Earnings Results

In the company’s Q1 18 results it crushed the Zacks consensus earnings estimates by producing an EPS of $0.59, well above the expected level of $0.12.  Revenues also came in better than expected at $1.45 billion.  Specifically, net income rose by +119.4%, net sales grew by +2.4%, and EPS improved by +31.1%.  Also, quarterly refined margin adjusted for FIFO improved by +19.3% due to stronger crack spreads. 

Management’s Take

According to David Lamp, CEO, “CVR Refining reported solid financial results for the 2018 first quarter. The quarter’s fiscal performance was driven by stronger crack spreads, hedging gains, a reduction to our estimated Renewable Volume Obligation and lower Renewable Identification Number prices. Combined crude oil throughput was approximately 178,000 barrels per day (bpd) for the quarter and was negatively impacted by the extended fluid catalytic cracking unit outage at our Coffeyville refinery. The strong financial results for the quarter, revisions to our capital spending plan and delay of our Wynnewood turnaround until 2019 allowed CVR Refining to reward unitholders with a strong quarterly distribution.”

Price and Earnings Consensus Graph

As you can see in the graph below, the stock price and future earnings estimates have been on the rise since the second half of 2017.

CVR Refining, LP Price and Consensus

CVR Refining, LP Price and Consensus | CVR Refining, LP Quote

Increasing Earnings Estimates

Due to the increased production in the U.S. and rising oil prices, earnings estimates for Q2 18, Q3 18, FY 18, and FY 19 have all been positively revised over the past 30 days.  Q2 18 improved from $0.55 to $0.66, Q3 18 rose from $0.67 to $1.05, FY 18 jumped up from $2.13 to $2.93, and FY 19 was lifted from $2.42 to $2.89.

Further, EPS growth is expected to be in triple digits for Q2, Q3 and FY 18; Q2 +607.7%, Q3 +123.4%, and FY 18 +388.3%. 

Bottom Line

With U.S. oil production levels expected to hit 11.9 million barrels in 2019, and the increase in world demand for the commodity, CVR is well positioned to take advantage of the golden age of refining.

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