Can Higher Throughput Aid HollyFrontier's (HFC) Q3 Earnings?
Zacks Investment Research | Oct 27, 2019 11:46PM ET
HollyFrontier Corporation (NYSE:HFC) is set to release third-quarter 2019 results before the opening bell on Thursday, Oct 31. The current Zacks Consensus Estimate for the to-be reported quarter is a profit of $1.43 on revenues of $4.3 billion.
The Zacks Consensus Estimate for third-quarter earnings has been revised upward 7.5% in the past 30 days. Given this backdrop, let’s delve into the factors that might have influenced the company’s performance in the September quarter.
Factors to Consider This Quarter
Certain factors which have a strong influence on HollyFrontier’s Refining segment are sending mixed signals with regard to the company’s results in the third quarter.
The Zacks Consensus Estimate for refined products sales volume is pegged at 472 thousand barrels per day (mbpd), indicating an increase from 447.8 mbpd reported in the third quarter of 2018. In the second quarter, HollyFrontier averaged around 469.1 mbpd. Moreover, throughput volume is likely to have improved to about 484 mbpd from 470.6 mbpd last year, while operating expenses per barrel most likely fell by 11.9% over the same period to $5.60 per barrel.
But on a bearish note, the Zacks Consensus Estimate for gross refining margin in HollyFrontier’s Mid-Continent region – the company’s largest – is pegged at $13.49 per barrel, down from $16.43 in the corresponding quarter of 2018. Consequently, HollyFrontier is likely to have experienced a 27.4% year-over-year decrease to net operating margin to $9.48 a barrel.
As a result, the company’s third-quarter income from the Refining segment – the main contributor to HollyFrontier earnings – is pegged at $306 million, compared with $418.5 million in the corresponding period of 2018.
Meanwhile, strong gathering volumes are expected to get reflected in the midstream segment bottom-line number, which may have increased 4.9% year over year to $66 million. On the other hand, the company’s Lubricants and Specialty Products segment is likely to have performed badly in third-quarter 2019 on base oil market weakness. Segment income is pegged at $18 million, down from $31.2 million in third-quarter 2018.
What Does Our Model Say?
The proven Zacks model does not conclusively show that HollyFrontier is likely to beat estimates this time around. The combination of a positive Zacks Investment Research
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