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HFC Stock Continues Climb Past 44% YoY Rise

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Aug. 3 2019, Updated 9:35 a.m. ET

HollyFrontier (HFC) stock rose 4.9% on August 1, its earnings release day, despite the fall in the oil prices, equity market, and peers. A 44% year-over-year rise in adjusted earnings supported HFC stock, and these better-than-expected EPS have boosted HFC stock.

West Texas Intermediate (WTI) fell 7.9% on August 1. Also, the SPDR S&P 500 ETF (SPY) fell 0.9% on that day.

HollyFrontier’s peers Valero Energy (VLO), Marathon Petroleum (MPC), and Phillips 66 (PSX) fell 1.1%, 1.8%, and 0.6%, respectively, on August 1. In the second quarter, Valero’s EPS stood at $1.5, beating analysts’ estimated EPS of $1.4. Marathon Petroleum’s adjusted EPS of $1.73 stood higher than analysts’ estimate of $1.32. Also, Phillips 66’s adjusted EPS of $3.02 exceeded analysts’ mean estimate of $2.74.

Further, Delek US Holdings (DK) stock fell by 10.1% on August 1. Analysts estimate Delek’s earnings to fall by 38% year-over-year in the next quarter.

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HFC stock shows strong second quarter

HollyFrontier had a strong quarter driven by higher Refining and Holly Energy Partners (HEP) (or midstream) earnings. HollyFrontier continued its growth drive in the second quarter where its capex stood at $57 million. Also, HollyFrontier returned wealth to shareholders in the form of dividends ($57 million) and share repurchases ($189 million).

In the second quarter earnings conference call, HollyFrontier’s president and CEO, George Damiris, said, “Looking forward, we will continue our focus on improving reliability across our refining system and successfully integrating Sonneborn further strengthening our earnings profile. With no major planned downtime until September, our refineries are well positioned for strong operational and financial performance in the third quarter.”

HFC stock forecast is promising

Estimates of the HFC stock price range for the period ending August 9, 2019, are shown below.

Considering HollyFrontier’s implied volatility of 31.0% and assuming a normal distribution of prices and a standard deviation of prices, HFC stock price could close between $54.6 and $49.8 per share in the eight days ending August 9.

Higher earnings support HFC stock

A 33% year-over-year rise in adjusted EBITDA boosted HFC stock.

HollyFrontier’s refining adjusted EBITDA rose by 44% to $556 million in the second quarter. Higher refining margins partly offset by lesser throughputs caused the rise. HollyFrontier’s gross refining margin rose by $3.1 per barrel in Q2 2018 to $19.6 per barrel in Q2 2019. But the company’s throughput fell by 2% year-over-year.

However, in the second quarter, HollyFrontier’s lubricants segment’s adjusted EBITDA fell by 27% year-over-year to $29 million. The fall was led by -$35 million Rack Back EBITDA, which was impacted by weaker base oil markets. In spite of this, Rack Forward EBITDA rose from $52 million in Q2 2018 to $64 million in Q2 2019.

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