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Do Analysts Like HollyFrontier?

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Jun. 7 2019, Updated 10:47 a.m. ET

Analysts’ ratings

Currently, HollyFrontier (HFC) is covered by 17 analysts. Among the analysts, three or 18% rated it as a “buy” or “strong buy,” 11 or 65% rated it as a “hold,” and three rated it as a “sell” or “strong sell.”

Recently, Simmons Energy lowered its target price on HollyFrontier stock from $60 to $49. JPMorgan Chase reduced its target price from $59 to $57. HollyFrontier’s mean target price of $56 per share implies an ~42% gain from the current level.

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Why the “hold” rating?

HollyFrontier’s asset base is growing through capex and acquisitions. However, many analysts rated HollyFrontier as a “hold” due to its earnings outlook.

Analysts expect the company’s earnings to fall 30% in 2019. The lower earnings are due to the anticipated weakness in the refining and lubricants earnings in 2019. Lower oil spreads are expected to impact the company’s refining earnings. The Canadian differential and Midland spread have been lower year-over-year in the second quarter. HollyFrontier’s lubricant segment’s Rack Back earnings are expected to be lower due to weakness in the base oil cracks.

However, the company has maintained its focus on growth activities. HollyFrontier continues to expand its lubricant segment, modernize its refining operations, and strengthen its midstream operations. These activities could result in better earnings in the coming years. Until analysts witness growth in the company’s earnings, most of them will likely continue to rate HollyFrontier as a “hold.”

Peers’ ratings

Valero Energy (VLO) and Phillips 66 (PSX) have been rated as a “buy” by 79% and 67% of the analysts, respectively. Delek US Holdings (DK), PBF Energy (PBF), and Marathon Petroleum (MPC) have been rated as a “buy” by 47%, 50%, and 94% of the analysts, respectively.

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