A month has gone by since the last earnings report for HollyFrontier (HFC - Free Report) . Shares have lost about 7.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is HollyFrontier due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
HollyFrontier Q2 Loss Narrower Than Expected
HollyFrontier Corp. reported second-quarter 2020 net loss per share (excluding special items) of 25 cents, narrower than the Zacks Consensus Estimate of a loss of 56 cents. The outperformance reflects stronger-than-expected refining margins and throughput.
However, the bottom line compared unfavorably with the year-ago adjusted profit of $2.18. The underperformance mainly stemmed from the coronavirus-induced collapse in demand for transportation fuels and lubricants.
Revenues of $2.1 billion missed the Zacks Consensus Estimate of $2.3 billion and slumped 56.9% from the second-quarter 2019 sales of $4.8 billion.
Refining: Adjusted EBITDA from the Refining segment, which is the main contributor to HollyFrontier’s earnings, was $25 million. This reflected a massive from the year-ago quarter’s income of $556.1 million, primarily due to sharply narrower gross margins, which was down 57% to $8.44 per barrel as coronavirus destroyed product demand. Nevertheless, margins outpaced the Zacks Consensus Estimate of $8.08 per barrel.
Total refined product sales volumes averaged 382,910 barrels per day (bpd), down 18.4% from 469,100 bpd in the year-ago quarter. Moreover, throughput decreased from 484,890 bpd in the year-ago quarter to 377,500 bpd but outpaced the Zacks Consensus Estimate of 354,000 bpd. Meanwhile, capacity utilization was 76.5%, down from 99.1% in second-quarter 2019.
Lubricants and Specialty Products: The segment EBITDA totaled $15.2 million, 47.3% lower than $28.9 million reported in the year-ago quarter on industrial and automotive end market demand weakness. Product sales averaged 26,990 bpd, decreasing from the prior-year level of 34,660 bpd. Further, throughput fell 3.6% year over year to 16,370 bpd in the reported quarter.
HEP: This unit includes HollyFrontier’s majority interest in Holly Energy Partners L.P., a publicly-traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.
Segment EBITDA was $112.5 million, up from $88.6 million in second-quarter 2019. Earnings were buoyed by a $33.8 million gain on sales-type leases.
As of Jun 30, HollyFrontier had approximately $902.5 million in cash and cash equivalents, and $2.5 billion in long-term debt, representing a debt-to-capitalization of 29.5%.
During the quarter, the company paid $57.2 million in dividends.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -50% due to these changes.
Currently, HollyFrontier has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, HollyFrontier has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.