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Delek US Holdings (DK) Down 0.5% Since Last Earnings Report: Can It Rebound?

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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 0.5% 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 drivers.

Delek Posts Narrower-Than-Expected Q2 Loss, Sales Top Estimates

Delek’s second-quarter 2021 results recently reported an adjusted loss of 88 cents a share, narrower than the Zacks Consensus Estimate of a loss of $1.01, attributable to a strong contribution from its logistics segment. However, the loss was wider than the year-ago quarterly loss of 48 cents. This underperformance was due to weak contribution from the refining segment and an escalated operating expense.

Quarterly revenues of $2.19 billion compared favorably with the year-ago sales of $1.54 billion and also surpassed the Zacks Consensus Estimate of $1.96 billion.

Segmental Performances

Refining:  The company reported a negative margin of $19.9 million for this segment against the positive $59.7 million in the year-ago quarter. However, adjusted margins of -$5 million narrowed from -$126.6 million in the year-ago period. Results improved from increased crack spreads as the rising frequency of vaccination and a worldwide economic recovery buoyed 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 $64.2 million, up 4.6% from $61.4 million in the year-ago period, led by higher refinery utilization as well as demand along with divesting Trucking Assets.

Retail: Margin for the unit, which was formed from the acquisition of Alon USA Energy in 2017, fell 9.9% to $21.9 million from the year-earlier quarter’s level of $24.3 million on lower Retail fuel margin. Delek’s merchandise sales of $84.5 million with a margin of 32.7%, on average, compared unfavorably with $89.4 million sales carrying a margin of 30.8%, on average, in the prior year. Its retail fuel gallons sale totaled $43 million in the June quarter of 2021, the average margin being 39 cents per gallon. This compared favorably with $42.4 million sale, the average margin being 45 cents per gallon in second-quarter 2020.

Financials

Total operating expenses incurred in the quarter increased 50.5% from the prior-year period to $2,276.9 million.

In the reported quarter, Delek spent $65.7 million on capital programs (92.4% on the Refining segment). As of Jun 30, 2021, the company had cash and cash equivalents worth $833 million and a long-term debt of $2,197.9 million with the total debt to total capital of 69.8%.

Guidance

Delek projects third-quarter 2021 total operating expenses in the 145-$155 million band while total crude throughput is estimated in the 280,000-290,000 barrels per day range.

The company anticipates its 2021 capital expenses to be around $175-$185 million, comprising turnarounds.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -52.08% due to these changes.

VGM Scores

Currently, Delek US Holdings has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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. It's no surprise Delek US Holdings has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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