HollyFrontier Earnings: An Early Look

Earnings season is now starting to wind down, with most companies already having reported their quarterly results. But there are still some companies left to report, and HollyFrontier (NYSE: HFC  ) is about to release its quarterly earnings. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Refining companies have enjoyed unparalleled success lately, with a glut of local crude oil combined with high global prices for refined products leading to huge crack spreads for HollyFrontier. How long can the good times last? Let's take an early look at what's been happening with HollyFrontier over the past quarter and what we're likely to see in its quarterly report next Tuesday.

Stats on HollyFrontier

Analyst EPS Estimate

$2.26

Change From Year-Ago EPS

113%

Revenue Estimate

$4.93 billion

Change From Year-Ago Revenue

(0.9%)

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Will HollyFrontier keep refining its profits this quarter?
Analysts have got really excited about HollyFrontier's earnings prospects over the past few months. They've raised consensus earnings-per-share for the just-ended quarter by $0.33 and lifted full-year 2013 EPS by $1.35. The stock has also reflected that enthusiasm, rising 25% just since mid-November.

Refining stocks have done so well lately because they have access to cheap sources of oil on U.S. soil. In particular, HollyFrontier, Valero (NYSE: VLO  ) , and Tesoro (NYSE: TSO  ) have taken advantage of their geographical proximity to productive oil plays to cash in on low-priced domestic crude, earning $20 per barrel in cost savings versus having to import crude at higher Brent prices. Although margins across the industry are high, HollyFrontier crushes its competitors, nearly doubling margin per barrel at Phillips 66 (NYSE: PSX  ) despite the latter's 25% gains since becoming an independent company.

Some fear that pipeline expansion projects could allow cheap crude oil to become available for export, raising crude prices and cutting HollyFrontier's profitable margins. Seaway Pipeline operators Enterprise Products Partners (NYSE: EPD  ) and Enbridge certainly hope so, as they build a large pipeline to connect the Cushing hub to the Gulf Coast that should be finished in early 2014. Yet if production keeps rising at the pace it has, then even expanded pipelines won't be enough to curb the glut.

Just a few days ago, HollyFrontier gave investors something to celebrate, boosting its regular dividend by 50% and adding a special dividend for the seventh time since the merger of Holly and Frontier, adding $0.50 per share to its total distribution. That move suggests that HollyFrontier has reason to think its higher profits are sustainable for the long run.

In HollyFrontier's quarterly report, be on the lookout for any signs that crude supplies are suffering from lower production. With so many oil and gas producers straining to develop oil and liquids plays at the expense of natural gas, however, this seems like something HollyFrontier probably won't have to worry about.

The need for greater pipeline capacity is giving Enterprise Products Partners a boost, but will the good times in the U.S. energy industry last? Find out in our premium research report on the pipeline company, in which we examine whether Enterprise is a smart buy in the current energy-industry environment. Don't wait; click here now to check out the report.

Click here to add HollyFrontier to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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  • Report this Comment On February 25, 2013, at 11:07 AM, RocksForJocks wrote:

    I believe crude exports overseas from US are not allowed without government approval. You should check, no?

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