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Delek (DK) Stock Barely Moves Since Q2 Earnings Announcement
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The stock of diversified downstream energy company Delek US Holdings (DK - Free Report) has hardly moved since its second-quarter 2022 results were announced on Aug 4. The muted response, despite the top and bottom-line beats, could be attributed to the increase in the company’s full-year capital spending guidance.
What Did Delek’s Earnings Unveil?
Delek US Holdings reported second-quarter 2022 adjusted net income per share of $4.40, which handily beat the Zacks Consensus Estimate of $3.07 and turned around from the year-earlier loss of 88 cents. The outperformance could be attributed to supportive refining fundamentals that pushed margins higher. The company said that its adjusted EBITDA was $518.4 million, compared with $46.1 million in the year-earlier period.
Meanwhile, Delek’s revenues of $6 billion surged 173% year over year and beat the consensus mark by $1.8 billion, primarily due to soaring sales from its key Refining segment. Revenues from the unit came in at $4.5 billion, more than doubling from the second quarter of 2021 and 41.9% above the Zacks Consensus Estimate.
Delek is using the excess cash from a supportive environment to reward investors with dividends and buybacks. As part of that, DK’s board of directors declared a special dividend of 20 cents in June and reinstated the regular quarterly payout of 20 cents per share
Delek US Holdings, Inc. Price, Consensus and EPS Surprise
Refining: The Refining segment’s contribution margin (refining margin minus operating expenses) rose sharply from just $14.1 million in the second quarter of 2021 to $618.3 million and trumped the Zacks Consensus Estimate of $282 million. Moreover, oil throughput achieved a record of approximately 295,000 barrels a day.
The significant improvement in results reflects higher refining margins and product demand. Overall, elevated consumption paired with considerably lower refining capacity in the OECD countries provided a tailwind for refinery profits. In particular, constrained Russian fuel exports in the wake of the Ukraine conflict have further tightened refining fundamentals.
Logistics: This unit represents Delek’s majority interest in Delek Logistics Partners, L.P., a publicly traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.
The Logistics unit’s margin of $69.3 million was higher than the year-ago period’s income of $64.2 million but missed the Zacks Consensus Estimate of $88 million. The segment benefited from robust refinery utilization and contribution from the 3Bear Energy acquisition but was hurt by lower volumes through the East Texas Crude Logistics System.
Retail: In the second quarter of 2022, the Retail segment — formed by the acquisition of Alon USA Energy in 2017 — had a contribution margin of $18.2 million compared with $21.9 million a year ago. Further, the margin failed to match the consensus mark of $26.2 million.
While merchandise sales of $83.4 million were marginally below the second-quarter 2021 sales of $84.5 million, the same managed to beat the Zacks Consensus Estimate by 10.3%. Even merchandise margin of 34% improved from 32.7% in the year-ago period. In the second quarter, DK’s retail stations sold 44,911 thousand gallons of gasoline compared with 42,978 thousand gallons a year ago. However, these factors were more than offset by a lower store count (248 versus 252) and a 15.4% decline in retail fuel margin to 33 cents per gallon.
Cost, Balance Sheet
The company, carrying a Zacks Rank #2 (Buy), reported total operating costs and expenses of $5.5 billion for second-quarter 2022, up 144.9% from the year-ago quarter. This rise was primarily attributable to the higher cost of sales, which surged 147.9%.
As of Jun 30, Delek US Holdings had cash and cash equivalents of $1.2 billion and long-term debt of $2.7 billion, with debt-to-total capital of about 67.2%.
Guidance
Delek projects third-quarter 2022 crude oil throughput to average between 285,000 and 295,000 barrels per day or roughly 96% utilization at the midpoint. For full-year 2022, the company now sees capital expenditure between $290 and $300 million compared with the prior estimate of $250-$260 million. Finally, DK hopes to start its repurchase program by buying shares worth $25-$35 million during the July-September period as part of its newly expanded buyback authorization of $400 million.
Some Key Refining Earnings
While we have discussed DK’s second-quarter results in detail, let’s see how some other refining companies fared this earnings season.
Phillips 66 (PSX - Free Report) reported adjusted earnings per share of $6.77, comfortably beating the Zacks Consensus Estimate of $5.92. The bottom line also skyrocketed from a profit of 74 cents per share in the year-ago quarter.
PSX’s worldwide margins surged to $28.31 per barrel from the year-ago quarter’s $3.92. The same in the Central Corridor and Atlantic Basin/Europe increased to $26.72 and $30.39 per barrel from the year-ago levels of $6.40 and $4.63, respectively. In the Gulf Coast, Phillips 66 saw the metric jump to $24.80 per barrel from $2.10 in the prior-year quarter. The West Coast witnessed an increase in margins from $3.37 per barrel in the year-ago quarter to $33.13 in the June-end quarter of 2022.
Another refining giant, Valero Energy (VLO - Free Report) reported adjusted earnings of $11.36 per share, compared with a meager 48 cents in the year-ago quarter. The bottom line also beat the Zacks Consensus Estimate of $9.70 per share. VLO’s strong quarterly results were supported by increased refinery throughput volumes and a higher refining margin.
For the quarter, Valero’s refining throughput volumes were 2,962 thousand barrels per day (MBbls/d), up from 2,835 MBbls/d in second-quarter 2021. Meanwhile, VLO’s refining margin per barrel of throughput increased to $30.01 from the year-ago level of $7.95.
Finally, we have Marathon Petroleum (MPC - Free Report) , which reported second-quarter adjusted earnings of $10.61 per share, comfortably beating the Zacks Consensus Estimate of $9.17 and compared with a profit of merely 67 cents per share in the year-ago period. MPC’s bottom line was favorably impacted by the stronger-than-expected performance of its Refining & Marketing segment, whose operating income totaled $7.1 billion, ahead of the Zacks Consensus Estimate by 108.4%.
The company repurchased shares worth $4.1 billion during the May-July period and has now completed more than 80% of its target to buy back $15 billion in common stock. This was after Marathon Petroleum concluded the sale of its Speedway business, comprising approximately 3,900 c-stores in 35 states to Japan-based retail group Seven & i Holdings — the owner of the 7-Eleven convenience store chain — for $21 billion. With the existing capital return program coming to a close, the MPC board authorized a new $5 billion repurchase scheme with no expiration date.
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Delek (DK) Stock Barely Moves Since Q2 Earnings Announcement
The stock of diversified downstream energy company Delek US Holdings (DK - Free Report) has hardly moved since its second-quarter 2022 results were announced on Aug 4. The muted response, despite the top and bottom-line beats, could be attributed to the increase in the company’s full-year capital spending guidance.
What Did Delek’s Earnings Unveil?
Delek US Holdings reported second-quarter 2022 adjusted net income per share of $4.40, which handily beat the Zacks Consensus Estimate of $3.07 and turned around from the year-earlier loss of 88 cents. The outperformance could be attributed to supportive refining fundamentals that pushed margins higher. The company said that its adjusted EBITDA was $518.4 million, compared with $46.1 million in the year-earlier period.
Meanwhile, Delek’s revenues of $6 billion surged 173% year over year and beat the consensus mark by $1.8 billion, primarily due to soaring sales from its key Refining segment. Revenues from the unit came in at $4.5 billion, more than doubling from the second quarter of 2021 and 41.9% above the Zacks Consensus Estimate.
Delek is using the excess cash from a supportive environment to reward investors with dividends and buybacks. As part of that, DK’s board of directors declared a special dividend of 20 cents in June and reinstated the regular quarterly payout of 20 cents per share
Delek US Holdings, Inc. Price, Consensus and EPS Surprise
Delek US Holdings, Inc. price-consensus-eps-surprise-chart | Delek US Holdings, Inc. Quote
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Inside DK’s Segments
Refining: The Refining segment’s contribution margin (refining margin minus operating expenses) rose sharply from just $14.1 million in the second quarter of 2021 to $618.3 million and trumped the Zacks Consensus Estimate of $282 million. Moreover, oil throughput achieved a record of approximately 295,000 barrels a day.
The significant improvement in results reflects higher refining margins and product demand. Overall, elevated consumption paired with considerably lower refining capacity in the OECD countries provided a tailwind for refinery profits. In particular, constrained Russian fuel exports in the wake of the Ukraine conflict have further tightened refining fundamentals.
Logistics: This unit represents Delek’s majority interest in Delek Logistics Partners, L.P., a publicly traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.
The Logistics unit’s margin of $69.3 million was higher than the year-ago period’s income of $64.2 million but missed the Zacks Consensus Estimate of $88 million. The segment benefited from robust refinery utilization and contribution from the 3Bear Energy acquisition but was hurt by lower volumes through the East Texas Crude Logistics System.
Retail: In the second quarter of 2022, the Retail segment — formed by the acquisition of Alon USA Energy in 2017 — had a contribution margin of $18.2 million compared with $21.9 million a year ago. Further, the margin failed to match the consensus mark of $26.2 million.
While merchandise sales of $83.4 million were marginally below the second-quarter 2021 sales of $84.5 million, the same managed to beat the Zacks Consensus Estimate by 10.3%. Even merchandise margin of 34% improved from 32.7% in the year-ago period. In the second quarter, DK’s retail stations sold 44,911 thousand gallons of gasoline compared with 42,978 thousand gallons a year ago. However, these factors were more than offset by a lower store count (248 versus 252) and a 15.4% decline in retail fuel margin to 33 cents per gallon.
Cost, Balance Sheet
The company, carrying a Zacks Rank #2 (Buy), reported total operating costs and expenses of $5.5 billion for second-quarter 2022, up 144.9% from the year-ago quarter. This rise was primarily attributable to the higher cost of sales, which surged 147.9%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
As of Jun 30, Delek US Holdings had cash and cash equivalents of $1.2 billion and long-term debt of $2.7 billion, with debt-to-total capital of about 67.2%.
Guidance
Delek projects third-quarter 2022 crude oil throughput to average between 285,000 and 295,000 barrels per day or roughly 96% utilization at the midpoint. For full-year 2022, the company now sees capital expenditure between $290 and $300 million compared with the prior estimate of $250-$260 million. Finally, DK hopes to start its repurchase program by buying shares worth $25-$35 million during the July-September period as part of its newly expanded buyback authorization of $400 million.
Some Key Refining Earnings
While we have discussed DK’s second-quarter results in detail, let’s see how some other refining companies fared this earnings season.
Phillips 66 (PSX - Free Report) reported adjusted earnings per share of $6.77, comfortably beating the Zacks Consensus Estimate of $5.92. The bottom line also skyrocketed from a profit of 74 cents per share in the year-ago quarter.
PSX’s worldwide margins surged to $28.31 per barrel from the year-ago quarter’s $3.92. The same in the Central Corridor and Atlantic Basin/Europe increased to $26.72 and $30.39 per barrel from the year-ago levels of $6.40 and $4.63, respectively. In the Gulf Coast, Phillips 66 saw the metric jump to $24.80 per barrel from $2.10 in the prior-year quarter. The West Coast witnessed an increase in margins from $3.37 per barrel in the year-ago quarter to $33.13 in the June-end quarter of 2022.
Another refining giant, Valero Energy (VLO - Free Report) reported adjusted earnings of $11.36 per share, compared with a meager 48 cents in the year-ago quarter. The bottom line also beat the Zacks Consensus Estimate of $9.70 per share. VLO’s strong quarterly results were supported by increased refinery throughput volumes and a higher refining margin.
For the quarter, Valero’s refining throughput volumes were 2,962 thousand barrels per day (MBbls/d), up from 2,835 MBbls/d in second-quarter 2021. Meanwhile, VLO’s refining margin per barrel of throughput increased to $30.01 from the year-ago level of $7.95.
Finally, we have Marathon Petroleum (MPC - Free Report) , which reported second-quarter adjusted earnings of $10.61 per share, comfortably beating the Zacks Consensus Estimate of $9.17 and compared with a profit of merely 67 cents per share in the year-ago period. MPC’s bottom line was favorably impacted by the stronger-than-expected performance of its Refining & Marketing segment, whose operating income totaled $7.1 billion, ahead of the Zacks Consensus Estimate by 108.4%.
The company repurchased shares worth $4.1 billion during the May-July period and has now completed more than 80% of its target to buy back $15 billion in common stock. This was after Marathon Petroleum concluded the sale of its Speedway business, comprising approximately 3,900 c-stores in 35 states to Japan-based retail group Seven & i Holdings — the owner of the 7-Eleven convenience store chain — for $21 billion. With the existing capital return program coming to a close, the MPC board authorized a new $5 billion repurchase scheme with no expiration date.