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Delek (DK) Posts Earnings Beat in Q1, Increases Dividend

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Delek US Holdings, Inc. (DK - Free Report) delivered a comprehensive beat in the first quarter of 2019, wherein it surpassed both earnings and sales estimates. Robust contribution from the refining segment on the back of favorable Midland differentials buoyed its results. The company posted adjusted net income per share of $1.54, comfortably surpassing the Zacks Consensus Estimate of 48 cents and increasing from the comparable year-ago period’s profit of 33 cents.

Notably, it reported record net income of $149.3 million in the quarter under review, rebounding from a loss of $40.4 million in the corresponding period of 2018. Total expenses incurred in the quarter declined 14.5% from the prior-year period to $1,977.5 million.

Quarterly revenues came in at $2,200 million, beating the Zacks Consensus Estimate of $2,182 million. However, the top line compared unfavorably with the year-ago sales of $2,353 million. 

Delek US Holdings, Inc. Price, Consensus and EPS Surprise

Delek US Holdings, Inc. Price, Consensus and EPS Surprise

Delek US Holdings, Inc. price-consensus-eps-surprise-chart | Delek US Holdings, Inc. Quote

Segmental Performance

Refining: Margin from the Refining segment was $294.3 million, skyrocketing 121% from $133.2 million recorded in the year-ago quarter. The improvement reflects wider Midland discount versus Cushing (on continued congestion in the Permian Basin), lower RIN costs and higher crack spreads.

Notably, with the completion of the Alkylation project at the Krotz Springs refinery in April, the firm expects an additional annualized net income and EBITDA of $33.2 million and $50 million, respectively.

Logistics: This unit includes Delek’s 63% interest in Delek Logistics Partners, L.P. (DKL - Free Report) , a publicly-traded master limited partnership that owns, operates, develops, and acquires pipelines and other midstream assets. Margin from the Logistics unit totaled $40.1 million versus $36.3 million in the year-ago period. The segment’s results were positively impacted by contribution from the drop down of Big Spring refinery logistics properties. This was partly offset by a decrease in gross margin per barrel in West Texas.

Retail: Margin for the unit — which came into being following the acquisition of Alon USA Energy in 2017 — declined 14.3% from the year-ago quarter to $10.2 million due to lower merchandise sales, partly offset by higher margins. Delek’s merchandise sales came in at $75.3 million with an average margin of 31% compared with $80.5 million with an average margin of 30.2% in the year-ago period.

Capex & Balance Sheet, Dividend & Stock Buyback

In the reported quarter, Delek spent $128.4 million on capital programs (63.6% on the Refining segment). As of Mar 31, the company had cash and cash equivalents of $989.7 million and a long-term debt of $1,729 million, with a debt-to-capitalization ratio of 47.7%.

During the quarter under review, Delek bought back shares worth $46.2 million. It is expected to repurchase additional $60 million shares in the second quarter.

The company declared quarterly dividend of 28 cents a share, marking a 3.7% sequential rise. The dividend will be payable on Jun 3 to its shareholders of record as of May 20.

Zacks Rank and Key Picks

Delek currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Meanwhile, investors interested in the energy space can consider some better-ranked players such as:

Devon Energy Corporation (DVN - Free Report) : Devon’s 2019 earnings are expected to grow 68.2% on a year-over-year basis.

Repsol SA (REPYY - Free Report) : Repsol delivered average positive earnings surprise of 8.98% in the trailing four quarters.

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