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Why Is Delek US Holdings (DK) Down 16.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for Delek US Holdings (DK - Free Report) . Shares have lost about 16.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Delek Posts Wider-Than-Expected Q4 Loss, Sales Top Estimates

Delek’s fourth-quarter 2020results recently reported an adjusted loss of $2.25 a share, wider than the Zacks Consensus Estimate of a loss of $1.84 as well as the year-ago quarterly loss of 11 cents. This underperformance was due to weak contribution from the refining segment.

Quarterly revenues of $1.88 billion compared unfavorably with the year-ago sales of $2.28 billion. However, the top line surpassed the Zacks Consensus Estimate of $1.42 billion. This better-than-expected report was driven by a strong contribution from the logistics segment and a tight leash on operating expenses.

Segmental Performance

Refining: The company reported a negative margin of $82 million for this segment against the positive $127.8 million in the year-ago quarter.Results were hurt by a lower crude differential environment and crack spreads resulting from coronavirus-induced reduced demand.

Logistics: This unit represents the company’s majority 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 $62.2 million, up 46.4% from $42.5 million in the year-ago period, led by divesting the Big Spring Gathering business and Trucking Assets plus an elevated crude gathering and operating expense reductions.

Retail: Margin for the unit, formed from the acquisition of Alon USA Energy in 2017, declined 5% to $12.7 million from the year-earlier quarter’s level due to lower Retail fuel margin. Delek’s merchandise sales of $75.9 million with a margin of 30.1%, on average, compared favorably with $72.9 million sales carrying a margin of 30.6%, on average, in the prior year. Its retail fuel gallons sale totaled $41.5 million in the December quarter of 2020, the average margin being 33 cents per gallon. This compared unfavorably with $51.5 million sale, the average margin being 29 cents in fourth-quarter 2019.

Financials

Total operating expenses incurred in the quarter decreased 1.58% from the prior-year period to $2,196.1 million.

In the reported quarter, Delek spent $31.6 million on capital programs (64% on the Refining segment). As of Dec 30, 2020, the company had cash and cash equivalents worth $787.5 million and a long-term debt of $2,315 million with the total debt to total capital of 67.3%.

Guidance

Delek anticipates its 2021 capital expenses to be around $150-$160 million, comprising turnarounds. The capex estimate represents a decline of approximately $85 million from the prior-year levels.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -12.5% due to these changes.

VGM Scores

Currently, Delek US Holdings has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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