Mizuho Securities has reiterated its Neutral rating on shares of Delek US Holdings, Inc. (NYSE: NYSE:DK) with a steady price target of $26.00.
The firm's analysis pointed to lower quarter-over-quarter earnings for Delek due to decreased crack spreads, a result of a surplus in product supply compared to demand growth. This trend is affecting the entire refining industry, suggesting weaker earnings for the current quarter.
Despite the broader industry challenges, Delek US has been operating its refineries efficiently and making strides in its commercial and cost-saving initiatives.
The company's Enterprise Optimization Plan, which aims to boost cash flow by $100 million by the end of 2025, is a key part of these efforts. Additionally, Delek has made significant progress in its strategic plan aimed at reducing the discount in its sum-of-the-parts valuation.
The analyst's comments highlighted that while the macro trends in refining are soft, Delek's consensus estimates for EBITDA, which are in line with Mizuho Securities USA's estimate of $61 million, appear to be well-adjusted. The company's effective management of refineries and advancement in commercial strategies and cost-cutting measures are noted as positive steps.
In other recent news, Delek Logistics (NYSE:DKL) Partners, LP has initiated a public offering of $150 million in common units, with the potential to expand to $172.5 million if underwriters exercise their option. The proceeds will be used to redeem convertible preferred units and repay debt under its credit facility. Meanwhile, Delek US Holdings, Inc., has expanded its share repurchase program by an additional $400 million, emphasizing its commitment to enhancing shareholder value.
JPMorgan has upgraded Delek US's stock from Underweight to Neutral, raising the price target to $26.00. This change follows strategic reinvestments by the company. However, TD Cowen has revised Delek US's stock forecast, adjusting the price target to $18.00 from $19.00, while maintaining a Sell rating.
Delek Logistics Partners, LP also announced its intention to offer an additional $100 million in senior notes, maturing in 2029, to reduce the debt from its revolving credit facility. Despite achieving record throughput and advancing strategic initiatives, Delek US reported a net loss of $37 million and negative cash flow for its second quarter.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Delek US Holdings' financial position and market performance. The company's market capitalization stands at $1.23 billion, reflecting its current valuation in the market. Notably, Delek's revenue for the last twelve months as of Q2 2024 was $15.45 billion, with a revenue growth decline of 13.82% over the same period. This aligns with Mizuho's observation of industry-wide challenges and lower earnings expectations.
InvestingPro Tips highlight that Delek is trading near its 52-week low, which could be of interest to value investors considering the company's ongoing efficiency improvements and strategic initiatives. The company's dividend yield of 5.34% may also attract income-focused investors, despite the challenging industry environment.
It's worth noting that analysts have revised their earnings expectations downwards for the upcoming period, consistent with Mizuho's outlook on lower quarter-over-quarter earnings. This information, along with 8 additional InvestingPro Tips, provides a more comprehensive view of Delek's financial health and market position.
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