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HollyFrontier’s Earnings and Refining Margins Fell in 3Q16

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HollyFrontier’s Earnings and Refining Margins Fell in 3Q16 PART 1 OF 5

HollyFrontier Beat Estimates, 3Q16 Earnings Still Fell

HollyFrontier’s 3Q16 estimated and actual performance

HollyFrontier (HFC) posted its 3Q16 results on November 3, 2016. Before we proceed with our earnings review, let’s quickly examine its 3Q16 performance compared to estimates.

In 3Q16, HollyFrontier’s revenue surpassed Wall Street analysts’ estimates by 11%. Its 3Q16 adjusted earnings also beat analysts’ estimates. The company’s 3Q16 adjusted EPS (earnings per share) stood at $0.38—compared to estimated EPS of $0.36. However, HollyFrontier’s 3Q16 EPS was 79% lower than its 3Q15 adjusted EPS. The fall in its earnings year-over-year was due to the fall in its refining margins.

HollyFrontier Beat Estimates, 3Q16 Earnings Still Fell

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HollyFrontier’s 3Q16 earnings

In 3Q16, HollyFrontier reported earnings of $74 million—compared to $196 million in 3Q15. The fall in HollyFrontier’s income in 3Q16 was due to lower operating earnings from its Refining segment. It was partially offset by higher earnings from its Midstream segment.

HollyFrontier witnessed a drop in its Refining segment’s operating income in 3Q16—compared to 3Q15. It was due to a fall in its refining margin, a fall in its refinery utilization rates, and a rise in operating costs in 3Q16—compared to 3Q15. HollyFrontier’s gross refining margin fell 50% compared to 3Q15 to $9.8 per barrel in 3Q16. However, the operating income from HollyFrontier’s Midstream segment rose by $3 million to $47 million in 3Q16.

In comparison, Marathon Petroleum (MPC), Phillips 66 (PSX), and Valero Energy (VLO) posted 70%, 66%, and 56% falls in their EPS in 3Q16 compared to 3Q15, respectively. Alon USA Energy (ALJ) posted a loss in 3Q16. For diversified exposure to global stocks, you might consider the Vanguard Total World Stock ETF (VT).

In the next part, we’ll look at HollyFrontier’s Refining segment.

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