A month has gone by since the last earnings report for Tesoro Corporation . Shares have lost about 2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Fourth-Quarter 2016 Results
Tesoro reported fourth-quarter 2016 adjusted loss from continuing operations of $0.02 per share, which was narrower than the Zacks Consensus Estimate of loss of $0.18. Significant contribution from the logistics segment supported the results. The bottom line, however, deteriorated from the year-ago quarter earnings of $1.83 per share.
Tesoro reported quarterly revenues of $6,652 million as against $6,273 million in the comparable quarter last year. Also, the top line surpassed the Zacks Consensus Estimate of $6,573 million.
Refining: The segment posted operating income of $43 million compared with $12 million in the year-earlier quarter. Increase in refining margins improved the quarterly result.
Logistics: During the fourth quarter, this segment generated operating profit of $123 million compared with $97 million in the year-ago quarter. The improvement can be attributed to growth in the volume of the unit’s crude oil gathering and natural gas gathering and processing businesses as well as contributions from the Northern California Terminalling and Storage Assets and the Alaska Storage and Terminalling Assets completed in 2016.
Marketing: The segment earned $169 million compared with $175 million in the fourth quarter of 2015.
Total refining throughput averaged 841 thousand barrels per day (MBbl/d) as against 807 MBbl/d in the prior-year quarter.
Overall, throughput volumes in California (consisting of Martinez and Los Angeles refineries) rose from 490 MBbl/d to 521 MBbl/d, on a year-over-year basis. Throughput in Tesoro's Pacific Northwest (Alaska and Washington) operations increased to 189 MBbl/d from 177 MBbl/d in the year-ago comparable quarter. Moreover, throughput volumes in the Mid-Continent (North Dakota and Utah) decreased to 131 MBbl/d from 140 MBbl/d in the year-ago comparable quarter.
Gross refining margin increased 4.4% year over year to $9.45 per barrel.
Region-wise, refining margin decreased almost 6.9% to $10.74 per barrel in California, was down 13.6% to $7.58 per barrel in the Mid-Continent and rose more than 191.7% to $7.13 per barrel in Pacific Northwest, all on a year-over-year basis.
Realized Costs & Prices
Manufacturing costs before depreciation and amortization decreased 3% from the year-earlier level to $5.43 per barrel.
Total refined product sales averaged 993 Mbbl/d as against 984 Mbbl/d in the fourth quarter of 2015.
Tesoro's operating costs in the reported quarter were $680 million compared with $649 million in the fourth quarter of 2015.
Capital Expenditure & Balance Sheet
Tesoro's total capital spending in the reported quarter (including TLLP) totaled $324 million.
As of Dec 31, 2016, the company had $3,295 million of cash and cash equivalents and long-term debt (excluding TLLP) of $2.9 billion, representing a debt-to-capitalization ratio of 35%.
Tesoro expects throughput margin for the first quarter between 800 MBbl/d and 850 MBbl/d.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimate flatlined during the past month. There has been one upward revision for the current quarter compared to one downward. In the past month, the consensus estimate shifted 19.1% downward due to these changes.
At this time, Tesoro Corporation's stock has a poor Growth Score of 'F', a grade with the same score on the momentum front. However, 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 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
The stock is suitable solely for value based on our styles scores.
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.