A month has gone by since the last earnings report for Delek US Holdings (DK). Shares have lost about 0.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Delek US Holdings due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Delek US Q2 Earnings & Revenues Outpace Estimates
Delek US Holdings reported second-quarter 2023 adjusted net income of $1 per share, which beat the Zacks Consensus Estimate of 66 cents. The bottom line deteriorated from the year-ago quarter’s level of $4.40. The underperformance could be attributed to poor contributions from the Refining and Retail segments.
Adjusted EBITDA came in at $259.4 million compared with $462.2 million in the year-ago period.
Net revenues decreased 30% year over year to $4.2 billion. The figure, however, beat the consensus mark of $3.6 billion due to higher performance from the Logistics segment.
On Aug 4, 2023, DK’s board of directors approved a 2.2% increase in the regular dividend, bringing the quarterly payout to 23.5 cents per share. The dividend will be paid out on Aug 21, 2023, to shareholders of record as of Aug 12, 2023.
Refining: Adjusted EBITDA for the segment amounted to $201.1 million, indicating a decline from the prior-year quarter’s level of $463.1 million. This significant year-over-year decline can be attributed to lower refining crack spreads, with DK’s benchmark crack spreads decreasing approximately 49.2% during the period. However, the reported figure exceeded our prediction of $191.1 million.
Logistics: During the second quarter, the segment registered an adjusted EBITDA of $90.9 million compared with $69 million in the year-ago quarter. The figure also beat our projection of $83.8 million. This substantial growth can be attributed to the exceptional performance of the Midland Gathering system and the successful acquisition of 3 Bear Delaware.
Retail: The segment registered an adjusted EBITDA of $15 million during the reported quarter compared with $12.5 million in the year-ago period. The figure beat our projection of $6.2 million.
Higher fuel volume, higher average fuel margins and higher in-store sales were the main drivers of the increase.
Merchandise sales of $84.3 million outpaced the year-ago quarter’s reported figure of $83.4 million. The figure missed our estimate by 3.7%. The merchandise margin of 0.3% declined from 34% recorded in the year-ago period.
DK’s retail stations sold 45,687 thousand gallons of gasoline compared with 44,911 in the comparable period of 2022.
Total operating expenses in the second quarter decreased about 24.5% to $4.1 billion from the prior-year period’s level. Delek US spent $253.3 million on capital programs (about 70% on the Refining segment) in the same time frame.
As of Jun 30, 2023, the company had cash and cash equivalents worth $821.6 million and long-term debt of $2.8 billion, with debt to total capital of about 72.6%.
For full-year 2023, DK expects capital expenditures of approximately $350 million. It plans to spend $202 million on Refining, $81 million on Logistics, $31 million on Retail and $36 million on Corporate/Other.
For the third quarter, DK anticipates operating costs in the range of $210-$220 million, general and administrative expenses in the band of $65-$70 million, and depreciation and amortization costs between $85 and $90 million. It also projects net interest expenses in the $80-$85 million range.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 34.49% due to these changes.
At this time, Delek US Holdings has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, 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.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Delek US Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Delek US Holdings is part of the Zacks Oil and Gas - Refining and Marketing industry. Over the past month, PBF Energy (PBF), a stock from the same industry, has gained 5.5%. The company reported its results for the quarter ended June 2023 more than a month ago.
PBF Energy reported revenues of $9.16 billion in the last reported quarter, representing a year-over-year change of -35%. EPS of $2.29 for the same period compares with $10.58 a year ago.
PBF Energy is expected to post earnings of $3.09 per share for the current quarter, representing a year-over-year change of -61.2%. Over the last 30 days, the Zacks Consensus Estimate has changed +13.5%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for PBF Energy. Also, the stock has a VGM Score of A.
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