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Delek (DK) Q1 Loss Wider Than Expected Due to Weak Refining

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Delek US Holdings, Inc. (DK - Free Report) witnessed a comprehensive earnings miss for the first quarter of 2020. The company posted adjusted net loss per share of $1.74, wider than the Zacks Consensus Estimate of a loss of 98 cents. Moreover, the year-ago income was $1.54 per share. Notably, weak contribution from refining segment hampered results.

Quarterly revenues of $1,821 million compared unfavorably with the year-ago sales of $2,200 million. However, the top line surpassed the Zacks Consensus Estimate of $1,260 million owing to solid contributions from the Paline Pipeline, the Lion Pipeline System and the Gathering Assets.

Segmental Performance

Refining: The company reported a negative margin of $290.4 million for this segment against a profit of $301.9 million in the year-ago quarter. Results were hurt by lower crude differential environment.

Logistics: This unit represents the company’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 was $47.3 million, up 18% from $40.1 million in the year-ago period, led by a $3.6-million increase in income from equity method investments as well as improved efforts from the Paline Pipeline, the Lion Pipeline System and the Gathering Assets.

Retail: Margin for the unit, formed from the acquisition of Alon USA Energy in 2017, expanded 20.6% to $12.3 million from the year-earlier quarter’s level on the back of higher Retail fuel margin. Delek’s merchandise sales of $71.7 million with average margin of 31.6% compared unfavorably with sales of $75.3 million with average margin of 31% in the prior year. Its retail fuel gallons sale totaled $48 million, the average margin being 31 cents per gallon. This compared unfavorably with $53.9 million sale with average margin of 19 cents in first-quarter 2019.

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

Financials

Total expenses incurred in the quarter increased 10.4% from the prior-year period to $2,182.7 million.

In the reported quarter, Delek spent $190.2   million on capital programs (88.4% on the Refining segment). As of Mar 31, 2020, the company had cash and cash equivalents worth $784.9   million and a long-term debt of $2,185.5 million with total debt to total capital of 59.5%.

The company declared a quarterly dividend of 31 cents per share, payable Jun 3, 2020 to its shareholders of record as of May 20.

Guidance

In response to the coronavirus-induced bearish oil environment, Delek is slashing its 2020 capital expenses by $75 million from the prior guidance of $325 million

Further, the company intends to minimize its overall cost structure by approximately $100 million from the year-ago level. This can be achieved through the ongoing optimization of operating costs and implementation of a freeze on hiring to reduce overhead expenses.

Refining throughput for the second quarter is projected to be nearly 80% of utilization.

Zacks Rank & Key Picks

Delek has a Zacks Rank #4 (Sell).

Among other players in the energy sector that already reported earnings, the bottom-line results of Cheniere Energy Inc. (LNG - Free Report) and Williams Companies Inc. (WMB - Free Report) , both carrying a Zacks Rank #2 (Buy), beat the respective Zacks Consensus Estimate by 204.3% and 4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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