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MPC, VLO, HFC, and PSX: Can Their Earnings Grow in Q3 2018?


Oct. 4 2018, Published 2:14 p.m. ET

Refiners’ Q3 2018 estimates and rankings

In this series, we’ll rank refining stocks according to Wall Street analysts’ estimated year-over-year growth in EPS in the third quarter of 2018. The four refining companies we’ll look at in this series are Marathon Petroleum (MPC), HollyFrontier (HFC), Valero Energy (VLO), and Phillips 66 (PSX). We’ve also reviewed Wall Street analysts’ ratings for these stocks.

If we rank these refining stocks on their expected YoY (year-over-year) growth in EPS in the third quarter of 2018, then HollyFrontier occupies the top slot. It’s expected to post a considerable rise in earnings of 60% YoY.

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Similarly, Phillips 66 could post a significant increase in earnings compared to Marathon Petroleum and Valero. That could be because HollyFrontier and Phillips 66 have diversified earnings models that incorporate other segments such as chemicals and midstream. Although refining earnings could be weak in the quarter, other segments could support HFC’s and PSX’s total earnings.

Wall Street analysts expect refining earnings to fall YoY in the third quarter. Refining margin indicators and refining cracks in the industry point to a weaker margin environment. The benchmark crack, the US Gulf Coast WTI 3-2-1, fell in the third quarter compared to the third quarter of 2017.

However, in the quarter, RIN (Renewable Identification Number) prices weakened YoY. That could result in lower compliance expenses for refiners.

Overall, a weakness in refining earnings due to lower margins could be partially offset by lower RIN expenses.

Analyst ratings

If we consider “buy” ratings assigned to these companies, then Marathon Petroleum, which ranks third, has the highest “buy” ratings. However, HollyFrontier, which ranks first, has the lowest “buy” ratings. We’ll look at analyst ratings later in the series.

In the rest of this series, we’ll look at individual companies’ estimated earnings for the third quarter. Let’s start with HollyFrontier.


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