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Delek (DK) Stock Rises 10% After Earnings & Sales Beat in Q1

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Shares of Delek US Holdings, Inc. DK have gone up 10% since the first-quarter 2022 earnings release on May 3.

This upward stock movement could be attributed to Delek posting first-quarter earnings and revenues that outperformed the Zacks Consensus Estimate.

Behind the Earnings Headlines

Delek’s first-quarter 2022 results recently reported an adjusted profit of 58 cents a share, handsomely beating the Zacks Consensus Estimate of a loss of 14 cents. This outperformance could be attributed to the refining landscape having improved substantially from the pandemic-driven downturn over the past couple of years, prompted by a recent surge in energy prices. Moreover, the bottom line was substantially better than the year-ago quarter’s loss of $1.69 per share, attributable to stronger-than-expected contributions from its refining segment. The margin from the refining unit was $96.9 million, outpacing the Zacks Consensus Estimate of $76 million.

Quarterly revenues of $4.5 billion compared favorably with the year-ago sales of $2.4 billion and surpassed the Zacks Consensus Estimate of $2.8 billion.

Delek US Holdings, Inc. Price, Consensus and EPS Surprise

Delek US Holdings, Inc. Price, Consensus and EPS Surprise
Delek US Holdings, Inc. Price, Consensus and EPS Surprise

Delek US Holdings, Inc. price-consensus-eps-surprise-chart | Delek US Holdings, Inc. Quote

Segmental Performances

Refining:  DK reported a positive margin of $96.9 million for this segment compared with $10.4 million in the year-ago quarter. Moreover, the adjusted margin of $152.9 million rebounded from a negative $3.9 million in the year-ago period. On a year-over-year basis, results in this segment were favorably impacted by increased demand, attributable in part to low clean product inventories and continued macroeconomic improvements amid the pandemic, combined with the impact of sanctions on the Russian oil supply and corresponding improvements in crack spreads.

Logistics:  This unit represents Delek’s majority interest in Delek Logistics Partners, L.P. (DKL), a publicly traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets. The Logistics unit’s margin of $62.3 million was higher than the year-ago period’s figure of $56.9 million. This improvement was led by an increase in the utilization of assets supporting the Big Spring Refinery and enhanced throughput in joint venture pipelines.

Retail: The margin for the unit, which was formed by the acquisition of Alon USA Energy in 2017, declined by about 17.4% to $13.8 million from the year-earlier quarter’s level of $16.7 million. Delek’s merchandise sales of $69.7 million, with a margin of 34.6%, on average, compared unfavorably with $74.6 million sales, carrying a margin of 32.7%, on average, in the prior year. Its retail fuel gallon sales totaled 39.5 million in the reported quarter, the average margin being 31 cents per gallon. This compared marginally unfavorably with 39.8 million sales, the average margin being 35 cents per gallon in the first quarter of 2021.

Financials

Total operating expenses incurred in the quarter increased by about 80.9% from the prior-year period’s level to $4,412.4 million.

In the reported quarter, Delek spent $32.9 million on capital programs (about 43.5% on the Refining segment). As of Mar 31, 2022, DK had cash and cash equivalents worth $854.1 million and long-term debt of $2,130.7 million, with debt to total capital of about 69.4%.

Guidance

Delek projects the second-quarter 2022 crude oil throughput to average between 280,000 and 290,000 barrels per day or roughly 94% utilization at the midpoint.

For full-year 2022, Delek maintains the capital expense guidance of around the $250-$260 million range, excluding capital spending associated with the planned 3Bear acquisition that is expected to close around mid-year.

The company mentioned that it is looking at a dividend payout and a share buyback in the second quarter or the third quarter after second-quarter results are declared.

Zacks Rank & Other Key Picks

Delek currently sports a Zacks Rank #1 (Strong Buy). Some other top-ranked players from the energy space are Matador Resources Company MTDR, Murphy Oil Corporation MUR and PDC Energy PDCE, all three enjoying a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Matador reported first-quarter 2022 adjusted earnings of $2.32 per share, beating the Zacks Consensus Estimate of $2.05. The strong quarterly earnings were driven by increased oil-equivalent production volumes and higher commodity price realizations.

As of Mar 31, 2022, Matador had cash and restricted cash of $120.2 million. The long-term debt was recorded at $1,498 million, including $50 million of borrowings under MTDR’s credit agreement. The debt-to-capitalization ratio was 39.1%.

Murphy posted a first-quarter 2022 adjusted net income of 73 cents per share, beating the Zacks Consensus Estimate of 59 cents by 23.7%.

Shares of Murphy have rallied 8.7% in the past year compared with the industry’s 80.4% rise. MUR had cash and cash equivalents of $480.6 million as of Mar 31, 2022, compared with $521.2 million as of Dec 31, 2021.

PDC Energy reported first-quarter adjusted earnings per share of $3.66, comfortably beating the Zacks Consensus Estimate of $3.18. The outperformance can be primarily attributed to better-than-anticipated production volumes and higher commodity prices.

PDC Energy is using the excess cash from a supportive environment to reward them with dividends and buybacks. As part of that, PDCE’s board of directors declared a quarterly cash dividend of 25 cents per share to its common shareholders. PDCE paid out $110 million to its shareholders in the first quarter through dividends and buybacks.


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