What's in the Cards for HollyFrontier (HFC) in Q1 Earnings?

HollyFrontier Corporation HFC is set to release first-quarter 2020 results on May 7, before the opening bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is 44 cents per share and for revenues is $3.79 billion.

Let’s delve into the factors that might have impacted the company’s performance in the March quarter.

Factors to Consider

The Zacks Consensus Estimate for refined products sales volume is pegged at 443,000 barrels per day (bpd), indicating an increase of 4.7% from 423,030 bpd reported in the first quarter of 2019. In the fourth quarter, HollyFrontier’s refined products sales volume averaged 418,800 bpd. Moreover, the Zacks Consensus Estimate for throughput volume currently stands at 464,000 bpd, suggesting an improvement of 7% from 433,720 bpd reported a year earlier while the consensus mark for operating expenses per barrel is pegged at $6.41, implying a 7.8% fall from the number reported in the year-ago period.

On a further positive note, the company’s Lubricants and Specialty Products segment is likely to have performed well in the first quarter. The Zacks Consensus Estimate for the segment’s income is pegged at $17.97 million. The prior-year figure was a loss of $9.13 million.

On the flip side, the Zacks Consensus Estimate for gross refining margin in HollyFrontier’s Mid-Continent region (the company’s largest) is pegged at $8.36 per barrel, suggesting a 25% decline from $11.14 in the corresponding quarter of 2019. Consequently, the Zacks Consensus Estimate for HollyFrontier's net operating margin is pegged at $2.33 a barrel, indicating a 48% decrease from the year-ago reported figure.

As a result, the company’s first-quarter income from the Refining segment — the main contributor to HollyFrontier earnings — is pegged at $74 million, hinting at a downside from $351 million reported in the corresponding period of 2019.

What Does Our Model Say?

Our proven Zacks model does not conclusively predict an earnings beat for HollyFrontier this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: HollyFrontier has an Earnings ESP of +1.41%.

Zacks Rank: HollyFrontier has a Zacks Rank #5 (Strong Sell).

Highlights of Q4 Earnings & Surprise History

In the last reported quarter, this Dallas, TX-based company reported net income per share (excluding special items) of 48 cents per share, missing the Zacks Consensus Estimate of 50 cents. This weak performance stemmed from lower contribution from the Refining segment. Moreover, the bottom line declined 78.6% from the year-ago adjusted earnings of $2.25.

However, revenues of $4.38 billion surpassed the Zacks Consensus Estimate of $3.81 billion and also inched up 0.85% from fourth-quarter 2018 sales of $4.34 billion owing to higher product sales at the Lubricants and Specialty Products segment.

As far as earnings surprises are concerned, this downstream operator is on an excellent footing, having topped the Zacks Consensus Estimate in three of the last four quarterly reports and missing the mark on one occasion, the average positive surprise being 23.51%. This is depicted in the graph below:

HollyFrontier Corporation Price and EPS Surprise

HollyFrontier Corporation Price and EPS Surprise

HollyFrontier Corporation price-eps-surprise | HollyFrontier Corporation Quote

Stocks to Consider

While an earnings outperformance looks uncertain for HollyFrontier, here are some firms worth considering from the energy space as our model shows that these have the right combination of elements to outpace estimates this reporting cycle:

Comstock Resources, Inc. CRK has an Earnings ESP of +2.63% and is Zacks #2 Ranked. The company is scheduled to release earnings on May 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

Laredo Petroleum, Inc. LPI has an Earnings ESP of +2.50% and is a #3 Ranked player. The firm is scheduled to release earnings on May 6.

Canadian Natural Resources Limited CNQ has an Earnings ESP of +36.36% and a Zacks Rank #3. The firm is scheduled to release earnings on May 7.

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