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HollyFrontier (HFC) Incurs Narrower-Than-Expected Loss in Q3

U.S. refiner HollyFrontier Corporation HFC reported third-quarter 2020 net loss per share (excluding special items) of 41 cents, narrower than the Zacks Consensus Estimate of a loss of 54 cents. The outperformance reflects stronger-than-expected refining throughput and robust results from the Lubricants and Specialty Products division.

However, the bottom line compared unfavorably with the year-ago adjusted profit of $1.68. The underperformance mainly stemmed weak refining margins.

Revenues of $2.8 billion beat the Zacks Consensus Estimate of $2.4 billion but slumped 36.3% from the third-quarter 2019 sales of $4.4 billion.

HollyFrontier Corporation Price, Consensus and EPS Surprise

HollyFrontier Corporation price-consensus-eps-surprise-chart | HollyFrontier Corporation Quote

 

Segmental Information

Refining: Adjusted loss from the Refining segment, which is the main contributor to HollyFrontier’s earnings, was $53.6 million. This reflected a massive plunge from the year-ago quarter’s income of $424.6 million, primarily due to sharply narrower gross margins, which was down 71% to $4.93 per barrel as steps to limit the spread of coronavirus significantly disrupted product demand. Moreover, margins came below the Zacks Consensus Estimate of $6.63 per barrel.

Total refined product sales volumes averaged 407,280 barrels per day (bpd), down 16.1% from 485,500 bpd in the year-ago quarter. Moreover, throughput decreased from 506,800 bpd in the year-ago quarter to 421,100 bpd but outpaced the Zacks Consensus Estimate of 395,000 bpd. Meanwhile, capacity utilization was 85.5%, down from 104.2% in third-quarter 2019.

Lubricants and Specialty Products: The segment EBITDA totaled $60.6 million, 59.5% higher than $38 million reported in the year-ago quarter on rebounding consumption of finished lubricants and base oils. Product sales averaged 33,560 bpd, decreasing from the prior-year level of 36,160 bpd. Further, throughput fell 18% year over year to 19,020 bpd in the reported quarter.

HEP: This unit includes HollyFrontier’s majority interest in Holly Energy Partners L.P. HEP, a publicly-traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.

Segment EBITDA was $55.3 million, down from $123.1 million in third-quarter 2019. Earnings were dragged down by a goodwill impairment charge.

Balance Sheet

As of Sep 30, HollyFrontier had approximately $1.5 billion in cash and cash equivalents, and $3.2 billion in long-term debt, representing a debt-to-capitalization of 35.1%.

During the quarter, the company paid $57.2 million in dividends.

Zacks Rank & Stock Picks

HollyFrontier holds a Zacks Rank #4 (Sell).

Some better-ranked players in the energy space are Antero Midstream Corporation AM and CrossAmerica Partners LP CAPL that sport a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Antero Midstream has an excellent earnings surprise history, having surpassed estimates in each of the last four quarters by 21.47%, on average

The 2020 Zacks Consensus Estimate for CrossAmerica Partners indicates 376.5% earnings per unit growth over 2019.

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Antero Midstream Corporation (AM): Free Stock Analysis Report
 
Holly Energy Partners, L.P. (HEP): Free Stock Analysis Report
 
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CrossAmerica Partners LP (CAPL): Free Stock Analysis Report
 
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