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HollyFrontier (HFC) Up 6.2% Since Earnings Report: Can It Continue?

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It has been more than a month since the last earnings report for HollyFrontier Corporation (HFC - Free Report) . Shares have added about 6.2% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? 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.

Second-Quarter Results

HollyFrontier Corp. reported strong second-quarter results, helped by improving refining margins, higher production and contribution from the newly acquired PCLI unit.

The company’s net income per share (excluding special items) came in at 66 cents, handily beating the Zacks Consensus Estimate of 46 cents and significantly ahead of the year-ago period profit of 28 cents.

Revenues of $3,458.9 million surpassed the Zacks Consensus Estimate of $3,386 million and climbed 27.4% from the second-quarter 2016 sales of $2,714.6 million.

Segmental Information

Refining: Net income from the Refining segment – which is the main contributor to HollyFrontier earnings – was $86.6 million, turning around from the loss of $436.2 million in the year-ago quarter. The improvement reflects wider gross margins, which jumped 29% to $11.47 per barrel.

Total refined product sales volumes averaged 483,210 barrels per day (bpd), up 9% from the 442,660 bpd in the year-ago quarter. Moreover, throughput increased from 428,590 bpd in the year-ago quarter to 467,090 bpd. Capacity utilization, at 102.13%, was up from 101.7% in the second quarter of 2016.

PCLI: Income from the newly acquired Petro-Canada Lubricants Inc. (or PCLI) business – bought from Canadian oil and gas giant Suncor Energy Inc. (SU - Research Report) earlier this year – totaled $12.6 million. Product sales averaged 23,720 bpd, while production and throughput came in at 20,880 bpd and 21,470 bpd, respectively.

HEP: This unit includes HollyFrontier’s 36% interest in Holly Energy Partners L.P. (HEP - Research Report) , a publicly-traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.

Segment profitability was $43.3 million, up from $39.9 million in the second quarter of 2016. Earnings were buoyed by higher volumes.

Balance Sheet

As of Jun 30, 2017, HollyFrontier had approximately $460.3 million in cash and cash equivalents and $2,228.0 million in net long-term debt, representing a debt-to-capitalization ratio of 29.8%.

How Have Estimates Been Moving Since Then?

Following the release and in the last month, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.

VGM Scores

At this time, HollyFrontier's stock has a strong Growth Score of A, though it is lagging a lot on the momentum front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Zacks' style scores indicate that the company's stock is suitable for value and growth investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.




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