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Western Refining’s 2Q16 Estimates: Earnings Expected to Improve

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2Q16 estimated and actual performance

Western Refining (WNR) is expected to post its 2Q16 results on August 2, 2016. Before we proceed with the 2Q16 estimates, let’s recap WNR’s 1Q16 performance versus 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.

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WNR’s adjusted income fell to $11.6 million in 1Q16, which is 90% lower than in 1Q15. 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 improved performance in the WNRL (Western Refining Logistics Operations) segment.

Western Refining’s 2Q16 estimates

In 2Q16, according to Wall Street analysts’ estimates, WNR is expected to post earnings per share of $0.51. This is 65% lower than the 2Q15 adjusted EPS, but higher than 1Q16 adjusted EPS. WNR’s revenues are estimated to be around $2 billion in 2Q16, 25% lower than its 2Q15 revenues.

In 2Q16, refining earnings are likely to improve compared to 1Q16. This is due to the fact that cracks have widened in the second quarter. We’ll discuss this change in the next part of the series.

On a yearly basis, WNR’s earnings are expected to decline. WNR’s peer Valero Energy (VLO), Northern Tier Energy (NTI), and CVR Refining (CVRR) are expected to post 60%, 61%, and 87% decline in earnings in 2Q16, respectively, compared to 2Q15. The iShares Global Energy ETF (IXC) has ~5% exposure to refining sector stocks.

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