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HFC’s EPS to Fall More than Earnings of Peers

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Jun. 20 2019, Updated 11:12 a.m. ET

HollyFrontier’s earnings estimate

Wall Street analysts estimate HollyFrontier’s (HFC) earnings to fall 30% in 2019. Delek US Holdings (DK), Valero Energy (VLO), and Marathon Petroleum’s (MPC) EPS are expected to fall by 4%, 10%, and 21%, respectively, in the year.

HollyFrontier has refining, midstream, and lubricant and specialty products business segments. HollyFrontier’s EPS are estimated to fall to $4.5 in 2019. However, in Q2 2019, HollyFrontier’s EPS are expected to rise 6% YoY to $1.5.

HollyFrontier has sound financials with a comfortable debt and decent liquidity position. Plus, the company has been growing via capex and acquisitions. HFC’s lubricant segment has grown vastly via acquisitions.

However, HollyFrontier’s lubricant segment is expected to experience weaker base oil cracks in 2019, which could lead to lower rack back lubricant earnings for the company. Also, lower oil spreads, like the Midland spread and the Canadian differential, could impact HFC’s refining earnings.

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Valuation and dividend yield

HollyFrontier trades at a forward PE of 8.2x, below the peer average of 8.5x. The lower valuations perhaps reflect the company’s current year earnings prospects.

Further, HollyFrontier’s current yield stands at 3.2%, below the peer average of 4.1%. In Q1 2019, HFC provided shareholder returns of $57 million via dividends and $78 million via stock repurchases.

Overall, HollyFrontier has sound financials, but its earnings are estimated to fall in 2019. Plus, the stock trades below the average dividend yield.

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