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Andeavor (ANDV) Q4 Earnings, Revenues Miss Estimates
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Andeavor reported fourth-quarter 2017 adjusted earnings from continuing operations of 37 cents per share, which missed the Zacks Consensus Estimate of $1.18. Tepid performance from the Refining segment and increased expenses led to weaker-than-expected results. The bottom line, however, improved significantly from the year-ago quarter’s loss of 2 cents per share on strong performance from the Logistics and Marketing segments.
Andeavor reported quarterly revenues of $10,652 million, marginally below the Zacks Consensus Estimate of $10,789 million. However, the top-line surged 60% from the year-ago quarter level of $6,652 million.
Refining: The segment posted operating loss of $56 million compared with an operating profit of $43 million in the year-ago quarter. While total throughput levels increased, lower margins coupled with higher cost of materials and manufacturing led to weaker results.
Total refining throughput averaged 1,122 thousand barrels per day (MBbl/d) compared with 841 MBbl/d in the prior-year quarter. Overall, throughput volumes in California (consisting of Martinez and Los Angeles refineries) increased from 521MBbl/d in the year-ago quarter to 542 MBbl/d in the fourth quarter of 2017.
Throughput in Andeavor's Pacific Northwest (Alaska and Washington) operations was 189 MBbl/d, flat with the year-ago quarter. Throughput volumes in the Mid-Continent (North Dakota, Utah, New Mexico, Texas and Minnesota) were up 198% year over year to 391 MBbl/d in the reported quarter.
However, the refining margin stood at $7.62 per barrel in the quarter under review, reflecting a decline of more than 19% from the year-ago figure of $9.45 a barrel. Region-wise, refining margin tumbled more than 45% to $5.86 per barrel in California and 38% to $4.43 in the Pacific Northwest. However, the margins were up by 53% to $11.62 in Mid-Continent on a year-over-year basis.
Logistics: During the fourth quarter, this segment generated operating profit of $195 million compared with $123 million in the year-ago quarter. The performance was driven by contributions from the acquisition of Western Refining Logistics along with North Dakota Gathering and Processing Assets buyouts.
Marketing: The segment recorded $236 million in revenues compared with $169 million in fourth-quarter 2016. Performance in the quarter was positively impacted by higher fuel margins. Retail and Branded fuel margins were up 19.4%.
Riding on the Western Refining acquisition, merchandise margin rose to $47 million in the quarter from $1 million in the year-ago period. Positive contributions from the Western Refining stores helped fuel the margins. In 2017, the company expanded its geographical spread by entering Mexico and also increased its total retail and branded stores by 31% year over year.
Realized Costs & Prices
Manufacturing costs excluding depreciation and amortization were $5.28 per barrel against $5.43 per barrel recorded in the year-ago period.
Total refined product sales averaged 1,235 Mbbl/d in the reported quarter compared with 993 Mbbl/d in fourth-quarter 2016.
Cost and Expenses
The company’s total expenses amounted to $10,494 million in the quarter under review, reflecting an increase of over 63% from the fourth quarter of 2016. Andeavor's operating costs (excluding depreciation and amortization) in the reported quarter were $890 million compared with $680 million in fourth-quarter 2016.Further, the cost of materials surged over 64% to amount to $9,087 million in the quarter. Depreciation and amortization expenses came in at $282 million against $218 million in the prior quarter. General and administrative expenses increased by 61%. Loss on asset disposal and impairment charges incurred in the quarter amounted to $45 million against $2 million in the year-ago quarter.
Capital Expenditure & Balance Sheet
Andeavor’s total capital spending in the reported quarter including Andeavor Logistics LP totaled $462 million against $324 million in the fourth quarter of 2016. Full-year capex stood at $1,353 million, reflecting an increase of about 43% from 2016. Turnaround and Marketing Branding expenditures for the fourth quarter were $142 million compared with $126 million in the year-ago quarter.
As of Dec 31, 2017, the company had $543 million of cash and cash equivalents. Excluding Andeavor Logistics’ debt and equity, total debt was $3.6 billion.
Dividend
In the fourth quarter, the company repurchased 2.7 million shares for $292 million and paid cash dividends of $91 million. In 2017, the company returned more than $1 billion to shareholders through dividends and buybacks.
The board of directors declared a quarterly cash dividend of 59 cents per share, payable on Mar 15, 2018 to all holders of record as of Feb 28, 2018. Debt-to-capitalization ratio of the company stands at 36.3%.
Guidance
Andeavor issued a preliminary guidance for the first quarter of 2018. The company expects throughput level between 1,015 MBbl/d and 1,070 MBbl/d. Region wise, California expects throughput volumes between 430 and 455 MBbl/d. Pacific Northwest and Mid Continent expects throughput levels within 185-195 MBbl/d and 400–420 MBbl/d, respectively.
The company expects total capital expenditures to be around $1.5 billion in 2018, with $1.1 billion allocated to Andeavor and the remaining directed toward Andeavor Logistics. Turnaround expenditures for full-year 2018 are expected to be $575 million.
Other top-ranked stocks in the same industry include HollyFrontier Corp. and Marathon Petroleum Corp. (MPC - Free Report) . Both these companies also sport a Zacks Rank #1.
HollyFrontier’s 2018 earnings are expected to grow 49.5% year over year. The company delivered average positive earnings surprise of 8.04% in the trailing four quarters.
Marathon Petroleum’s 2018 earnings are expected to grow 34.74% from the year-ago quarter. The company delivered average positive earnings surprise of 182.6% in the trailing four quarters.
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Andeavor (ANDV) Q4 Earnings, Revenues Miss Estimates
Andeavor reported fourth-quarter 2017 adjusted earnings from continuing operations of 37 cents per share, which missed the Zacks Consensus Estimate of $1.18. Tepid performance from the Refining segment and increased expenses led to weaker-than-expected results. The bottom line, however, improved significantly from the year-ago quarter’s loss of 2 cents per share on strong performance from the Logistics and Marketing segments.
Andeavor reported quarterly revenues of $10,652 million, marginally below the Zacks Consensus Estimate of $10,789 million. However, the top-line surged 60% from the year-ago quarter level of $6,652 million.
Andeavor Price, Consensus and EPS Surprise
Andeavor Price, Consensus and EPS Surprise | Andeavor Quote
Segmental Analysis
Refining: The segment posted operating loss of $56 million compared with an operating profit of $43 million in the year-ago quarter. While total throughput levels increased, lower margins coupled with higher cost of materials and manufacturing led to weaker results.
Total refining throughput averaged 1,122 thousand barrels per day (MBbl/d) compared with 841 MBbl/d in the prior-year quarter. Overall, throughput volumes in California (consisting of Martinez and Los Angeles refineries) increased from 521MBbl/d in the year-ago quarter to 542 MBbl/d in the fourth quarter of 2017.
Throughput in Andeavor's Pacific Northwest (Alaska and Washington) operations was 189 MBbl/d, flat with the year-ago quarter. Throughput volumes in the Mid-Continent (North Dakota, Utah, New Mexico, Texas and Minnesota) were up 198% year over year to 391 MBbl/d in the reported quarter.
However, the refining margin stood at $7.62 per barrel in the quarter under review, reflecting a decline of more than 19% from the year-ago figure of $9.45 a barrel. Region-wise, refining margin tumbled more than 45% to $5.86 per barrel in California and 38% to $4.43 in the Pacific Northwest. However, the margins were up by 53% to $11.62 in Mid-Continent on a year-over-year basis.
Logistics: During the fourth quarter, this segment generated operating profit of $195 million compared with $123 million in the year-ago quarter. The performance was driven by contributions from the acquisition of Western Refining Logistics along with North Dakota Gathering and Processing Assets buyouts.
Marketing: The segment recorded $236 million in revenues compared with $169 million in fourth-quarter 2016. Performance in the quarter was positively impacted by higher fuel margins. Retail and Branded fuel margins were up 19.4%.
Riding on the Western Refining acquisition, merchandise margin rose to $47 million in the quarter from $1 million in the year-ago period. Positive contributions from the Western Refining stores helped fuel the margins. In 2017, the company expanded its geographical spread by entering Mexico and also increased its total retail and branded stores by 31% year over year.
Realized Costs & Prices
Manufacturing costs excluding depreciation and amortization were $5.28 per barrel against $5.43 per barrel recorded in the year-ago period.
Total refined product sales averaged 1,235 Mbbl/d in the reported quarter compared with 993 Mbbl/d in fourth-quarter 2016.
Cost and Expenses
The company’s total expenses amounted to $10,494 million in the quarter under review, reflecting an increase of over 63% from the fourth quarter of 2016. Andeavor's operating costs (excluding depreciation and amortization) in the reported quarter were $890 million compared with $680 million in fourth-quarter 2016.Further, the cost of materials surged over 64% to amount to $9,087 million in the quarter. Depreciation and amortization expenses came in at $282 million against $218 million in the prior quarter. General and administrative expenses increased by 61%. Loss on asset disposal and impairment charges incurred in the quarter amounted to $45 million against $2 million in the year-ago quarter.
Capital Expenditure & Balance Sheet
Andeavor’s total capital spending in the reported quarter including Andeavor Logistics LP totaled $462 million against $324 million in the fourth quarter of 2016. Full-year capex stood at $1,353 million, reflecting an increase of about 43% from 2016. Turnaround and Marketing Branding expenditures for the fourth quarter were $142 million compared with $126 million in the year-ago quarter.
As of Dec 31, 2017, the company had $543 million of cash and cash equivalents. Excluding Andeavor Logistics’ debt and equity, total debt was $3.6 billion.
Dividend
In the fourth quarter, the company repurchased 2.7 million shares for $292 million and paid cash dividends of $91 million. In 2017, the company returned more than $1 billion to shareholders through dividends and buybacks.
The board of directors declared a quarterly cash dividend of 59 cents per share, payable on Mar 15, 2018 to all holders of record as of Feb 28, 2018. Debt-to-capitalization ratio of the company stands at 36.3%.
Guidance
Andeavor issued a preliminary guidance for the first quarter of 2018. The company expects throughput level between 1,015 MBbl/d and 1,070 MBbl/d. Region wise, California expects throughput volumes between 430 and 455 MBbl/d. Pacific Northwest and Mid Continent expects throughput levels within 185-195 MBbl/d and 400–420 MBbl/d, respectively.
The company expects total capital expenditures to be around $1.5 billion in 2018, with $1.1 billion allocated to Andeavor and the remaining directed toward Andeavor Logistics. Turnaround expenditures for full-year 2018 are expected to be $575 million.
Zacks Rank and Stocks to Consider
Andeavor flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Other top-ranked stocks in the same industry include HollyFrontier Corp. and Marathon Petroleum Corp. (MPC - Free Report) . Both these companies also sport a Zacks Rank #1.
HollyFrontier’s 2018 earnings are expected to grow 49.5% year over year. The company delivered average positive earnings surprise of 8.04% in the trailing four quarters.
Marathon Petroleum’s 2018 earnings are expected to grow 34.74% from the year-ago quarter. The company delivered average positive earnings surprise of 182.6% in the trailing four quarters.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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