Shares of HollyFrontier Corp. (HFC, Financial) surged 6.7% to $64.48 on the heels of first quarter results for fiscal 2018.
The market positively welcomed the boost in HollyFrontier’s first-quarter results compared to the analogous period of fiscal 2017. The oil and gas refiner closed the quarter with adjusted earnings per share of 77 cents. That, equaling an adjusted net income of $137.3 million, represented a meaningful advancement from 2017. Last year, the company closed the comparable with an adjusted loss of 19 cents per share.
The company beat consensus on earnings by 38 cents. The beat generated a 97.4% positive surprise.
The company attributed the improvement to higher sales per barrel and higher refining margins. Earnings from Petro-Canada Lubricants also had a significant contribution for the bottom line.
The company's revenue for the quarter came in at $4.13 billion, which was a 34.1% increase from last year same quarter. HollyFrontier beat consensus on revenues by $820 million.
The refinery gross margin, on a consolidated basis, increased 70% from $7.54 per produced barrel in the first quarter of 2017 to $12.83 per produced barrel in first quarter of 2018. Refining operating expenses were $5.69 per produced barrel sold versus $7.28 per produced barrel sold in the comparable quarter of 2017. The net operating margin was $13.44 per produced barrel, a boost from $12 per produced barrel in the comparable of 2017.
CEO George Damiris commented on the company's performance: “HollyFrontier's strong financial results reflect our ability to capitalize on the refining margins and crude spreads available during the first quarter. To date, crude spreads have been consistent, and we are optimistic about refining and lubricant margins going into the summer.”
The company’s refinery throughput was 452,050 consolidated barrels per day during the first quarter, an improvement from 405,360 barrels per day in the comparable quarter of 2017. The refiner sold 465,520 barrels of produced product per day, up from 388,440 barrels per day in the prior-year quarter. The refinery utilization rate increased to 90.9% in the first quarter of 2018 versus a rate of 81.2% in the comparable of 2017.
The company's total operating costs and expenses increased 20% on a year-over-year basis, from $3.11 billion to $3.73 billion.
The company closed the quarter with $781.5 million in cash on hand and securities and $2.4 billion in consolidated long-term debt. The total long-term debt-to-equity ratio is 38.7%.
HollyFrontier improved 26% on the New York Stock Exchange so far this year. As of May 2, the stock in the refiner has a market capitalization of $11.42 billion and the 52-week range is $23.46 to $64.92.
HollyFrontier has an average target price of $53.20, which represents a 17.5% decline from the current market valuation. The target price is a mean of 15 estimates, ranging between a low of $40 per share and a high of $64 per share. The recommendation rating is 2.9 out of 5.
The stock is trading abundantly above the 200, 100 and 50 SMA lines, as illustrated by the chart powered by GuruFocus:
According to GuruFocus, HollyFrontier is approaching over bought levels:
Therefore, for the coming quarters the strategy on this refiner is buying on any weakness.
During the first quarter of 2018, Ken Fisher opened a position in HollyFrontier and bought 6,414 shares. The average purchase price was $47.56 per share.
(Disclosure: I have no positions in any stock mentioned in this article.)
