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Andeavor’s 4Q17 Estimates: Could Its Earnings Surge?

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3Q17 estimated and actual performance

Andeavor (ANDV) is expected to post its 4Q17 results on February 15, 2018. Before we study its 4Q17 estimates, let’s recap ANDV’s 3Q17 performance versus the estimates.

In 3Q17, Andeavor reported revenues of $9.8 billion, which surpassed Wall Street estimates. However, the company’s 3Q17 adjusted EPS (earnings per share) stood at $2.90 compared to its estimated EPS of $3.00, missing the consensus estimates. However, ANDV’s 3Q17 adjusted EPS stood 118.0% higher than its 3Q16 adjusted EPS.

Andeavor’s net earnings attributable to its shareholders from continuing operations rose from $170.0 million in 3Q16 to $551.0 million in 3Q17. This included $209.0 million of inventory valuation benefits. 

ANDV’s operating income increased 140.0% YoY to ~$1.1 billion. This was due to a year-over-year (or YoY) rise in operating incomes of its Refining and the Logistics segments. This increase was partially offset by a YoY fall in the Marketing segment’s operating income. 

Andeavor closed the Western Refining acquisition in 2Q17. So, ANDV’s 3Q17 results reflected a full quarter of integrated performance of the merged entity.

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Andeavor’s 4Q17 estimates

According to Wall Street estimates, ANDV is expected to post EPS of $1.10 in 4Q17. This forecast is 38.0x higher than its 4Q16 adjusted EPS but is ~61.0% lower than its 3Q17 adjusted EPS. ANDV’s revenues are expected to be ~$10.8 billion in 4Q17, which is ~62.0% higher than its 4Q16 revenues.

Andeavor expects pretax benefits of $920.0 million in 4Q17 due to tax reform in the US. Andeavor’s refining index values have expanded year-over-year in its operating areas of California, the Pacific Northwest, and Mid-Continent in 4Q17. 

ANDV’s consolidated index value has surged in 4Q17 over 4Q16. This points towards a possible rise in the company’s refining margins in 4Q17 compared to 4Q16. We’ll evaluate this trend in the next part of the series.

ANDV’s peers have already posted results and have noted a year-over-year rise in earnings. Marathon Petroleum’s (MPC) 4Q17 EPS stood 140.0% higher than its 4Q16 adjusted EPS. Valero Energy (VLO) posted 43.0% higher EPS in 4Q17 over 4Q16, and , Phillips 66’s (PSX) 4Q17 EPS stood a whopping 7.0x higher than its 4Q16 adjusted EPS.

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