Morningstar

HF Sinclair Earnings: Earnings Slide as Share Repurchases Start With a Big Buy

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HF Sinclair’s DINO third-quarter adjusted earnings decreased to $760.4 million from $982.9 million a year ago, exceeding market expectations, on lower refining earnings that more than offset earnings improvement in the other segments, particularly lubricants. The firm returned $669.2 million to shareholders, including $585.6 million in repurchases (nearly 6% of market cap), which began during the quarter.

The refining segment’s adjusted EBITDA fell to $1.0 billion from $1.4 billion a year ago, as realized refining margins during the quarter fell to $26.59 per barrel from $31.47 a year ago. Despite the decline, margins remain well above midcycle levels, which should continue to support strong earnings and cash returns to shareholders. Crude throughput also fell to 601.9 thousand barrels a day during the quarter from 645.8 mb/d last year because of turnarounds at the Tulsa and Casper refineries.

Our fair value estimate and narrow moat rating are unchanged, leaving HF Sinclair as the most discounted refiner in our coverage. In addition to valuation, the initiation of repurchases means HF Sinclair is now matching peers’ cash returns. HF Sinclair has faced issues the last year following the acquisition of Sinclair, but it looks to be on track now, including its renewables segment consistently generating profits. This should continue as projects ramp up. As such, HF Sinclair looks attractive in a mostly fully valued sector.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Allen Good, CFA

Director
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Allen Good, CFA, is a director, Europe, for Morningstar*. Based in Amsterdam, he covers the oil and gas industries as well as manages a team of multi-industry analysts. He is also chair of the Morningstar Research Services Economic Moat Committee, a group of senior members of the equity research team responsible for reviewing all Economic Moat ratings issued by Morningstar. In this role, he is responsible for ensuring consistent application of Morningstar’s Economic Moat methodology across sectors and regions as well as updating and revising the methodology. His specialty is global integrated oils such as Exxon, Chevron and Shell and US independent refiners such as Valero and Marathon Petroleum. He also contributes to developing hydrocarbon price and petroleum product margin forecasts used in valuation models.

Before joining Morningstar in 2008, He performed merger and acquisition advisory work for a middle-market investment bank. Before that, he spent several years at Black & Decker in various operational roles, primarily focused on manufacturing and distribution.

Good holds a bachelor’s degree in business from the University of Tennessee and a master’s degree in business administration from Kenan-Flagler Business School at the University of North Carolina. He also holds the Chartered Financial Analyst® designation.

* Morningstar Holland BV (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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