Tesoro’s 2Q16 estimated and actual performance
Tesoro (TSO) posted its 2Q16 earnings on August 3, 2016, reporting revenues of $6.3 billion, which surpassed Wall Street analyst estimates. The company’s adjusted EPS (earnings per share) stood at $1.77, around 0.45% higher than its estimated EPS of $1.76. This EPS was 49% higher than 1Q16 adjusted EPS but 62% lower than 2Q15 adjusted EPS. TSO’s refining margins rose quarter-over-quarter but fell YoY.
Tesoro’s 2Q16 earnings versus expectations
In 2Q16, Tesoro’s consolidated net income of $449 million fell by 28% compared to 2Q15. The 2Q16 earnings included a pre-tax inventory gain of $363 million due to lower costs and market valuation. The Refining segment and the Marketing segment saw falls in their operating incomes, but this was partially offset by a rise in operating income from the company’s Logistics segment, or Tesoro Logistics LP (TLLP).
Income from the Refining segment fell to $520 million in 2Q16 as compared to $757 million in 2Q15. This was due to a lower refining margin and partially offset by the inventory gains.
TSO’s marketing segment’s operating income fell by 24% over 2Q15 to $161 million in 2Q16. This was due to a fall in fuel margins. However, the segment witnessed a rise in branded retail stations and higher consumer demand in 2Q16 than in 2Q15. Tesoro’s retail stations rose by 8% in 2Q16 YoY (year-over-year). TLLP’s operating income grew by 20% YoY to $125 million in 2Q16 due to higher volumes.
In comparison, PBF Energy (PBF), Marathon Petroleum (MPC), and Phillips 66 (PSX) posted 2Q16 adjusted EPS that were lower by 84%, 29%, and 49%, respectively, compared to their adjusted EPS in 2Q15. If you’re looking for exposure to high dividend yield stocks, you might consider the Vanguard High Dividend Yield ETF (VYM), which has ~11% exposure to energy sector stocks.
Now let’s analyze Tesoro’s refining margin.