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Will HollyFrontier Beat Its Q3 2018 Earnings Estimate?

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Second-quarter performance versus expectations

HollyFrontier (HFC) is expected to publish its third-quarter earnings results on October 31. Before we proceed with its third-quarter earnings estimates, let’s recap HollyFrontier’s second-quarter performance compared to the estimates.

In the second quarter, HollyFrontier’s revenue surpassed Wall Street analysts’ consensus estimate by ~10%. HollyFrontier also reported EPS of $1.94 attributable to its shareholders. However, on adjusting for special items, HollyFrontier’s adjusted EPS stood at $1.45, ~10% lower than its estimated EPS of $1.61. Nevertheless, HollyFrontier’s second-quarter EPS were 120% higher than its adjusted EPS in the second quarter of 2017.

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HollyFrontier’s net income attributable to its shareholders rose from $58 million in the second quarter of 2017 to $346 million in the second quarter of 2018. On adjusting for special items, HollyFrontier’s adjusted earnings stood at $259 million in the quarter. Its earnings rose due to the rise in refining and HEP (or midstream) earnings partially offset by a fall in lubricants and specialty products earnings.

HollyFrontier’s third-quarter estimates

Wall Street analysts expect HollyFrontier to post EPS of $1.7 in the third quarter, 63% higher than its adjusted EPS in the third quarter of 2017 and 20% higher than its adjusted EPS in the second quarter. HollyFrontier’s revenue is expected to be ~$4.3 billion in the third quarter, ~14% higher than its revenue in the third quarter of 2017.

HollyFrontier’s refining index values point toward likely weaker refining crack conditions in the third quarter. However, HollyFrontier’s refining margin could benefit from broader oil spreads in the quarter. Lower RIN (renewable identification number) prices in the quarter could also reduce compliance costs for the company. We’ll discuss this in the next article.

Wall Street analysts expect Phillips 66’s (PSX) and Valero Energy’s (VLO) EPS to rise 45% YoY and 5% YoY, respectively, in the third quarter. Marathon Petroleum’s (MPC) and Delek US Holdings’ (DK) EPS are expected to rise 2% YoY and 172% YoY, respectively.

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