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Can Higher Margins Boost HF Sinclair (DINO) Q2 Earnings?

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HF Sinclair Corporation (DINO - Free Report) is set to release second-quarter results on Aug 8. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of $4.50 per share on revenues of $8 billion.

Let’s delve into the factors that might have influenced this independent U.S. refiner’s results in the June quarter. But it’s worth taking a look at DINO’s previous-quarter performance first.

Highlights of Q1 Earnings & Surprise History

In the last-reported quarter, the Dallas, TX-based downstream operator crushed the consensus mark on strong margins and throughputs. DINO had reported adjusted net income per share of 99 cents, significantly above the Zacks Consensus Estimate of 3 cents. Revenues of $7.5 billion generated by the firm also came in above the Zacks Consensus Estimate by 40.5%.

HF Sinclair beat the Zacks Consensus Estimate for earnings in three of the last four quarters, resulting in an earnings surprise of 713.6%, on average. This is depicted in the graph below:
 

HF Sinclair Corporation Price and EPS Surprise

HF Sinclair Corporation Price and EPS Surprise

HF Sinclair Corporation price-eps-surprise | HF Sinclair Corporation Quote

 

Trend in Estimate Revision

The Zacks Consensus Estimate for the second-quarter bottom line has remained the same in the past seven days. The estimated figure indicates a 417.2% jump year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests a 74% increase from the year-ago period.

Factors to Consider

DINO is expected to have benefited from the strength in refining margins. In the first quarter of 2022, the company’s refining gross margin of $12.69 per barrel improved from $11.71 a year ago. Moreover, throughput rose from 374,160 barrels per day (bpd) in the first quarter of 2021 to 564,730 bpd. The positive momentum is most likely to have continued in the second quarter, thanks to a marked improvement in fuel demand on the back of rebounding road and airline travel, which pushed up crude differentials and margins. Consequently, the Zacks Consensus Estimate for HF Sinclair’s Refining segment operating income is pegged at $972 million, increasing exponentially from the prior-year quarter’s profit of just $250 million. This is likely to have buoyed the second-quarter results of HF Sinclair.

On a somewhat bearish note, a higher expense structure might have dampened some of the positive impact. HF Sinclair’s total operating cost in the first quarter more than doubled year over year to $7.2 billion. The upward cost trajectory is likely to have continued in the second quarter due to rising feedstoack and energy outlay.

What Does Our Model Say?

The proven Zacks model does not conclusively predict an earnings beat for HF Sinclair in the second quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: DINO has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $4.50 per share each.

Zacks Rank: HF Sinclair currently carries a Zacks Rank #1, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult this earnings season.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

While an earnings beat looks uncertain for DINO, here are some firms that you may want to consider on the basis of our model:

Grocery Outlet Holding Corp. (GO - Free Report) has an Earnings ESP of +3.55% and a Zacks Rank #2. The firm is scheduled to release earnings on Aug 9.

For 2022, Grocery Outlet has a projected earnings growth rate of 8.9%. Valued at around $4.1 billion, GO has gained around 33.6% in a year.

Gevo, Inc. (GEVO - Free Report) has an Earnings ESP of +25.00% and a Zacks Rank #2. The firm is scheduled to release earnings on Aug 8.

Over the past 30 days, Englewood, CO-based Gevo saw the Zacks Consensus Estimate for 2022 improve 2.9%. Valued at around $619.4 million, GEVO has lost around 45.4% in a year.

National Vision Holdings, Inc. (EYE - Free Report) has an Earnings ESP of +12.50% and a Zacks Rank #3. The firm is scheduled to release earnings on Aug 11.

National Vision Holdings topped the Zacks Consensus Estimate by an average of 233.2% in the trailing four quarters. EYE has lost some 42.6% in a year.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.