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Why Is Delek US Holdings (DK) Down 9.4% Since Last Earnings Report?

It has been about a month since the last earnings report for Delek US Holdings (DK). Shares have lost about 9.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Delek US Holdings due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Delek Q1 Loss Narrower Than Expected, Sales Decline Y/Y

Delek US Holdings reported first-quarter 2024 adjusted net loss of 41 cents per share, narrower than the Zacks Consensus Estimate of a loss of 56 cents per share, owing to lower year-over-year operating costs. However, the figure deteriorated from the year-ago quarter’s profit of $1.37 per share.  The underperformance could be attributed to the Refining segment's weak year-on-year contributions.

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Net revenues decreased 17.7% year over year to $3.2 billion and missed the consensus mark of $3.6 billion.

The diversified downstream energy company’s adjusted EBITDA came in at $158.7 million compared with $284.6 million in the year-ago period.

On May 2, DK’s board of directors approved a 2% increase in regular dividends, bringing the quarterly payout to 25 cents per share. The dividend was paid out on May 24, 2024, to shareholders of record as of May 17.

Segmental Performances

Refining: The segment's adjusted EBITDA was $106.1 million, reflecting a decline from the prior-year quarter's profit of $192.1 million. This significant year-over-year decline can be attributed to lower refining crack spreads. During the first quarter of 2024, DK's benchmark crack spreads fell by an average of 22.2% from prior-year levels. However, the reported figure beat our prediction of a profit of $93.1 million.

Logistics: This unit represents Delek’s majority interest in Delek Logistics Partners, L.P. — a publicly traded master limited partnership that owns, operates, develops, and acquires pipelines and other midstream assets.

During the first quarter, the segment registered an adjusted EBITDA of $99.7 million compared with $91.4 million in the year-ago quarter. However, the figure missed our projection of $100.7 million. The year-over-year growth can be attributed to strong contributions from Delaware Gathering systems, as well as annual rate increases.

Retail: The segment registered an adjusted EBITDA of $6.5 million during the reported quarter compared with $6.4 million in the year-ago period. However, the figure missed our projection of $8.8 million.

Merchandise sales of $70.7 million declined from the year-ago quarter’s reported figure of $73.9 million. The figure also marginally missed our estimate by 0.1 %. The merchandise margin increased to 33.5% from the year-ago quarter's reported figure of 33%.

Oil and gas refining and marketing company’s retail stations sold 39,683 thousand gallons of gasoline compared with 39,964 in the corresponding period of 2023.

Financials

Total operating expenses in the first quarter decreased about 15.5% year over year to $3.2 billion. Delek spent $45.9 million on capital programs in the same time frame.

As of Mar 31, 2024, the company had cash and cash equivalents worth $9.7 million and long-term debt of $1.6 billion, with debt to total capital ratio of about 70.7%.

2024 Guidance

For full-year 2024, the company expects capital expenditures of approximately $330 million as it plans to spend $220 million on Refining, $70 million on Logistics (Delek Logistics Partners), $15 million on Retail and $25 million on Corporate/Other.

For the second quarter, the company anticipates operating costs in the band of $215-$225 million, general and administrative expenses in the range of $60-$65 million, and depreciation and amortization costs between $90 million and $95 million. It also projects net interest expenses in the $80-$90 million range.

The company anticipates a total crude throughput of 287,000-300,000 barrels per day (bpd) and a total throughput of 299,000-312,000 bpd during the same time frame.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -33.55% due to these changes.

VGM Scores

Currently, Delek US Holdings has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Delek US Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Delek US Holdings belongs to the Zacks Oil and Gas - Refining and Marketing industry. Another stock from the same industry, Murphy USA (MUSA), has gained 8.9% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.

Murphy USA reported revenues of $4.84 billion in the last reported quarter, representing a year-over-year change of -4.6%. EPS of $3.12 for the same period compares with $4.80 a year ago.

For the current quarter, Murphy USA is expected to post earnings of $6.97 per share, indicating a change of +15.8% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.2% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Murphy USA. Also, the stock has a VGM Score of B.

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