PBF’s Refining Segment Just One Factor in Dismal 2Q Results



2Q16 estimated and actual performance

PBF Energy (PBF) released its 2Q16 results on July 29. Before we proceed with our review, let’s look at PBF’s 2Q16 performance versus estimates.

In 2Q16, PBF Energy’s revenues surpassed Wall Street analyst estimates by 25%. However, PBF’s 2Q16 adjusted EPS stood at $0.14 compared to the estimated EPS of $0.22. The posted EPS was 84% lower than the company’s 2Q15 adjusted EPS.

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PBF Energy’s 2Q16 earnings review

PBF’s adjusted operating income fell to $77 million in 2Q16 compared to $168 million in 2Q15. The operating income was adjusted for special items like an after-tax inventory gain of $95.3 million due to lower costs or market valuations. PBF’s adjusted net income stood at $13.9 million in 2Q16 compared to $80.5 million in 2Q15.

The fall in earnings was due to the subdued performance in the refining segment coupled with a fall in the logistics segment earnings. PBF’s refining margin contracted by 30% compared to 2Q15 to $6.5 per barrel in 2Q16. We’ll analyze PBF’s segments in the next part of this series.

PBF’s peer Marathon Petroleum (MPC) has also posted a 29% lower adjusted EPS in 2Q16 over 2Q15. Delek US Holdings (DK) and Alon USA Energy (ALJ) are expected to post losses in 2Q16. For exposure to refining sector stocks, you could consider the iShares US Energy ETF (IYE), which has ~8% exposure to the sector.

In the next few parts, we’ll analyze PBF’s segment-wise performance, stock performance, implied volatility, and analyst ratings after its 2Q16 earnings.


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