On Thursday, Mizuho Securities expressed concerns about Delek US Holdings, Inc. (NYSE:DK) shares, leading to a reduction in the company's price target. The financial institution has adjusted the target to $25 from the previous $27, while maintaining an Underperform rating on the stock.
The revision comes amid expectations of Delek US underperforming in key financial metrics. The firm anticipates the company to report significant misses in EBITDA, Free Cash Flow (FCF), and Earnings Per Share (EPS) compared to the market consensus. These projections are attributed to a combination of factors including lower benchmark crack spreads and weaker capture rates.
However, some positive aspects could partially counterbalance the negative outlook. Delek US has demonstrated increased throughput rates, operating at approximately 97% utilization compared to 91% in the first quarter of 2024 and about 93% in the second quarter of 2023.
Additionally, the company's ongoing commercial initiatives and cost-cutting measures, along with reduced losses in its supply and marketing segment, may offer some support to its financial performance.
The firm's analyst emphasized the rationale behind the rating and price target adjustment, stating, "We expect significant EBITDA/FCF/EPS misses vs. consensus from DK compared to current consensus, driven primarily by lower benchmark crack spreads and weak captures rates, partly offset by higher throughput rates (utilization at ¾97% vs 91% in 1Q24 and ¾93% in 2Q23), continued commercial and cost-cutting efforts, and lower losses in supply and marketing. Reiterate Underperform rating and lower our NAV-based PT to $25/share."
Investors and stakeholders of Delek US Holdings, Inc. are now equipped with the latest expectations from Mizuho Securities as they navigate the market's future developments.
In other recent news, Delek US has been subject to several adjustments from various firms. Mizuho Securities lowered its price target to $27, citing concerns over refining margins while maintaining an Underperform rating.
Similarly, Piper Sandler reduced its target to $25, keeping a Neutral rating. TD Cowen downgraded Delek US from Hold to Sell and lowered the price target to $20. JPMorgan also adjusted its outlook, reducing the stock's price target to $25 and maintaining an Underperform rating.
Following the release of mixed Q1 results, with a reported net loss of $33 million despite strong operational results in its Refining and Logistics segments, Delek US is exploring strategic options for its retail and marketing businesses.
These recent developments have led to a series of adjustments to Delek US's price target from various firms, including Mizuho Securities, Piper Sandler, TD Cowen, and JPMorgan.
The adjustments made by these firms reflect their analysis of Delek's various business segments and ownership interests. The firms' assessments also take into account the company's sum-of-the-parts valuation for the fiscal years 2024 and 2025. As these recent developments unfold, investors are advised to keep a close eye on further updates.
InvestingPro Insights
Amidst the concerns expressed by Mizuho Securities regarding Delek US Holdings, Inc. (NYSE:DK), the real-time data from InvestingPro provides additional context for investors. With a current market capitalization of $1.42 billion, Delek's stock is trading near its 52-week low, which aligns with the sentiment of caution. The company's price-to-earnings (P/E) ratio stands at -18.51, reflecting its challenges in generating profits over the last twelve months. However, the InvestingPro Tips suggest a potential upside; the stock's Relative Strength Index (RSI) indicates it is in oversold territory, and the valuation implies a strong free cash flow yield.
Despite the anticipated sales decline in the current year, analysts predict that Delek will turn profitable this year. This projection, coupled with management's aggressive share buybacks, could signal a longer-term confidence in the company's strategy and financial health. It's worth noting that Delek's share price has experienced significant volatility, with a three-month price total return of -29.41%, yet the stock generally trades with low price volatility. This juxtaposition may offer opportunities for investors with a keen eye for market fluctuations and recovery potential.
For those interested in a deeper analysis, InvestingPro has additional PRONEWS24 tips that could further inform investment decisions. These include insights on earnings revisions, gross profit margins, and revenue valuation multiples. With the promocode PRONEWS24, investors can access these insights and benefit from up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking a comprehensive suite of data and expert analysis.
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