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Behind Western Refining’s 1Q16 Earnings Nosedive

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Western Refining’s 1Q16 estimated and actual performance

Western Refining (WNR) released its 1Q16 results on May 3, 2016. In this series, we’ll take a wide-angle view of the company’s 1Q16 earnings. But first, let’s look at WNR’s 1Q16 performance versus the analyst estimates.

In 1Q16, WNR’s revenues missed Wall Street analyst estimates by 27%. In 1Q16, adjusted EPS (earnings per share) stood at $0.13, about 24% lower than the estimated EPS of $0.17. This was also 89% lower than its adjusted EPS in 1Q15 and stemmed from a fall in the company’s refining margin.

Inside Western Refining's 1Q16 Earnings Nosedive

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Peers

Valero Energy (VLO), Marathon Petroleum (MPC), and Phillips 66 (PSX) posted 1Q16 adjusted EPS that fell 96%, 68%, and 56% lower than their adjusted EPS in 1Q15, respectively. PBF Energy (PBF) also posted a loss in 1Q16. For diversified exposure to refining sector stocks, investors can consider the Vanguard Energy ETF (VDE), which has ~10% exposure to the sector.

Western Refining’s 1Q16 earnings review

WNR’s adjusted income fell to $11.6 million in 1Q16, which is 90% lower than in 1Q15. WNR’s income was adjusted for special items like inventory charges. WNR’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) fell from $314 million in 1Q15 to $98 million in 1Q16.

This decline was due to a subdued performance in two segments: Western (WNR’s stand-alone Refining and Marketing operations) and NTI (Northern Tier Energy Partners’ Refining, Transport, and Retail operations). But the overall decline was partly offset by better performance in the WNRL (Western Refining Logistics Operations) segment. We’ll look more closely at WNR’s segmental performance in the next part of this series.

Let’s start with a look at WNR’s segmental performance.

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