HollyFrontier Corp. (HFC, Financial) released its second-quarter 2017 results on Aug. 2.Â
The oil and gas refiner closed the quarter with adjusted EPS of 66 cents, a 135.7% increase from the second quarter of 2016.
The company beat expectations by 19 cents, generating a positive surprise of 40.40%.
Source: Yahoo Finance
Sales and revenue came in at $3.46 billion, up 27.4% from the prior-year quarter.
HollyFrontier attributed the improvement to “excellent operational performance, margin improvement and PCLI (Petro-Canada Lubricants) operations.”
The refinery gross margin, on a consolidated basis, increased 29.2% from $8.88 per produced barrel in second-quarter 2016 to $11.47 per produced barrel in second-quarter 2017.
On a consolidated basis, the company refined 483,210 barrels per day during the second quarter versus 442,660 barrels per day in the comparable period of 2016. It sold 465,900 barrels (of produced products) per day, up from 431,110 barrels (of produced products) per day in the prior-year quarter. The daily number of refined barrels sold during the quarter was 494,700, up from 459,300 barrels per day the year before.
The company's total operating costs and expenses increased 6% on a year-over-year basis, from $3.14 billion to $3.34 billion. Refining operating expenses were $5.54 per produced barrel sold versus $5.51 per produced barrel sold in the comparable quarter of 2016.
The increase in total operating expenses includes $52.7 million in costs resulting from the company’s integration of Petro-Canada Lubricants’ operations. HollyFrontier is dependent on this synergy as it wishes to grow its presence in the lubricants market, which bears potential for a significant boost to the company’s margin. The company paid $862.1 million in cash to acquire Petro-Canada.
As of June 30, HollyFrontier had approximately $460.326 million in cash and securities – a 255.5% increase from the previous quarter. Total long-term debt amounts to $2.23 billion. The value of the total equity item was $5.24 billion at the end of the second quarter, resulting in a debt-equity ratio of 42.6 versus an industry average of 24.50. The interest coverage ratio of 5.14 is well above the threshold of 1.5, meaning the company is able to cover interest expenses on outstanding debt.
HollyFrontier is trading around $30.49 per share, up $1.16 or 3.95% from the previous trading day, with a price-book (P/B) ratio of 1.14 and a price-sales (P/S) ratio of 0.47. The forward price-earnings (P/E) ratio is 21.10. For 2017, analysts expect the energy company to generate EPS of $1.17 and EPS of $2.15 for fiscal 2018.
The company pays an annual dividend of $1.32 per share through quarterly payments of 33 cents, bringing the dividend yield to 4.50%. The next dividend will be paid on Sept. 20 to shareholders on record as of Aug. 23. The ex-dividend date is Aug. 21.
As of today, the majority of analysts suggest holding shares of HollyFrontier with a recommendation rating of 2.9 out of 5. The recommendation rating ranges between 1.0 (Strong Buy) and 5.0 (Sell). The average target price per share is $30.92, which represents a 1.41% upside from the current share price.
Disclosure: I have no positions in HollyFrontier.
