Delek US Holdings (DK) Down 38.8% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Delek US Holdings (DK). Shares have lost about 38.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Delek US Holdings due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Delek Q4 Earnings Miss, Revenues Top Estimates

Delek US Holdings, Inc. witnessed a comprehensive earnings miss in the fourth quarter of 2019. The company posted adjusted net loss per share of 11 cents. However, the Zacks Consensus Estimate was of an income of a cent. Moreover, the same fell from the year-ago income of $2.03 per share. Notably, weak contribution from the retail and logistics segments hampered its results.

The company’s quarterly revenues of $2,284 million compared unfavorably with the year-ago sales of $2,474 million. However, the top line surpassed the Zacks Consensus Estimate of $2,255 million owing to solid revenues from the refining segment. Precisely, revenues from the refining segment came in at $2,162 million, beating the Zacks Consensus Estimate of $1,877 million.

Segmental Performance

Refining: Margin at this segment was $161.5 million, down 31.4% from $235.3 million in the year-ago quarter. Results were negatively impacted by lower crude differential environment and reduced sales volumes.

Logistics: This unit represents the company’s 63% interest in Delek Logistics Partners, L.P., a publicly-traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets. Margin from the Logistics unit was $42.5 million, down 5.5% from $45 million in the year-ago period due to spill related expenses worth $7.1 million, partially offset by strong operations in the Paline Pipeline and SALA gathering system.

Retail: Margin for the unit, formed following the acquisition of Alon USA Energy in 2017, declined 7.6% to $12.1 million from the year-earlier quarter, thanks to lower merchandise and fuel gallons sales. Delek’s merchandise sales of $72.9 million with average margin of 30.6% compared unfavorably with sales of $81 million with average margin of 30.2% in the prior year. Its retail fuel gallons sale totaled $51.5 million with average margin of 29 cents per gallon compared unfavorably with $53.3 million sale with average margin of 30 cents in fourth-quarter 2018.

Financials

Total expenses incurred in the quarter declined 2.43% from the prior-year period to $2,235.5 million.

In the reported quarter, Delek spent $103.3 million on capital programs (70.5% on the Refining segment). As of Dec 31, 2019, the company had cash and cash equivalents of $955.3 million and long-term debt of $2,030.7 million with a debt-to-capitalization ratio of 52.52%.

Delek bought back shares worth $30.3million in the fourth quarter.

The company declared a quarterly dividend of 31 cents per share, marking a 3.3% sequential hike. The dividend will be payable Mar 24 to its shareholders of record as of Mar 10.

Guidance

Crude throughput for the first quarter of 2020 is expected between 245,000 and 255,000 barrels per day.

Delek anticipates its full-year capital expenditure to be $325 million, indicating a 24% drop from the prior-year reported figure.

Delek projects its 2022 EBITDA for the Big Spring Gathering System to improve $5 million and is expected in the $45-$55 million band.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -450.83% due to these changes.

VGM Scores

At this time, Delek US Holdings has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Delek US Holdings has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.