17 Apr

Will HollyFrontier’s Earnings Fall in Q1?

WRITTEN BY Maitali Ramkumar

Fourth-quarter performance versus the expectation

HollyFrontier (HFC) is expected to publish its first-quarter results on May 2. Before we proceed with the first-quarter estimates, let’s recap HollyFrontier’s fourth-quarter performance versus the estimates.

In the fourth quarter, HollyFrontier’s revenues of $4.3 billion rose 9% YoY (year-over-year). The company’s adjusted EPS rose 221% YoY to $2.3 in the fourth quarter. There was a steep rise in the company’s refining margin and earnings. HollyFrontier’s adjusted EBITDA rose 92% YoY to $641 million in the fourth quarter.

Will HollyFrontier’s Earnings Fall in Q1?

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HollyFrontier’s adjusted earnings rose from $125 million in the fourth quarter of 2017 to $394 million in the fourth quarter of 2018. The adjusted earnings rose was due to higher refining earnings. The increase was partially offset by lower midstream and lubricants and specialty products’ earnings.

HollyFrontier’s first-quarter estimates

Analysts expect that HollyFrontier could post an EPS of $0.45 in the first quarter, which is 41% lower than its adjusted EPS in the first quarter of 2018 and 80% lower than its adjusted EPS in the fourth quarter of 2018. HollyFrontier’s revenues are expected to be ~$3.3 billion in the first quarter, which is ~19% lower than its revenues in the first quarter of 2018.

In the first quarter, HollyFrontier’s refining index values show a mixed trend with weakness in its primary operating regions. The company’s refining margin could also be impacted by narrower oil spreads in the quarter. However, lower renewable identification number prices in the quarter could reduce the company’s compliance costs.

Peers’ performance

Valero Energy (VLO) and Phillips (PSX) are expected to post 72% YoY and 50% YoY lower EPS, respectively, in the first quarter. However, Marathon Petroleum (MPC) and Delek US Holdings’ (DK) earnings are expected to rise. Marathon Petroleum’s EPS could increase from $0.04 in the first quarter of 2018 to $0.21 in the first quarter. Delek US Holdings’ earnings, which were negative in the first quarter of 2018, are expected to turn positive in the first quarter.

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