On Wednesday, Mizuho Securities adjusted its outlook on HF Sinclair Corporation (NYSE:DINO) shares, a company specializing in refining, lowering its price target from $53.00 to $50.00 while maintaining a Neutral rating on the stock. This revision reflects anticipated shortcomings in the company's third-quarter financial performance, attributed to operational and market challenges.
HF Sinclair is projected to fall short of the current consensus for its third-quarter results, with expected deficits in EBITDA by 17%, free cash flow (FCF) by 135%, and earnings per share (EPS) by 36%. These shortfalls are primarily due to issues within its refining segment, including maintenance turnarounds at the El Dorado and Parco refineries and a quarter-over-quarter decline in margin capture.
Despite difficulties in the refining operations, HF Sinclair's secondary businesses showed relative stability in the third quarter compared to the second quarter of 2024. While the lubricants segment experienced a slight downturn, this was partially offset by improved performance in the company's fuel retail sector.
The reduction in the net asset value (NAV)-based price target to $50.00 from $53.00 is attributed to weaker near-term economic conditions. The firm's outlook remains cautious, citing "soft macro trends in the refining sub-sector" as a reason for maintaining the Neutral rating on HF Sinclair shares.
In other recent news, HF Sinclair has experienced significant changes in its financial performance. JPMorgan has maintained a neutral rating for HF Sinclair, setting a target of $51. Adjustments to the company's third-quarter earnings per share (EPS) estimates have been made, with a downward revision to $0.20 from the previous $0.70, primarily due to lower refining captures. This estimate is below the Street consensus of $0.54.
The company's financial results for the second quarter of 2024 show a net income of $152 million, a decrease from the previous year. HF Sinclair also reported an adjusted net income of $149 million and a decline in adjusted EBITDA to $406 million. Despite these decreases, the company experienced improved utilization rates and sales volumes in its refining segment, alongside positive EBITDA in its renewables segment.
Piper Sandler has affirmed its Overweight rating on HF Sinclair, even with revised third-quarter forecasts that reflect a decrease in earnings per share (EPS) from $0.65 to $0.36, and a reduction in earnings before interest, taxes, depreciation, and amortization (EBITDA) from $365 million to $299 million. Yet, the firm believes that HF Sinclair will experience less sequential earnings degradation compared to its peers and will benefit from resilient non-refining income streams.
These recent developments also include HF Sinclair's strategic plans for 2024, which involve an investment of around $800 million in sustaining capital expenditures and a distributor partnership to expand the Solar branded business in Europe, the Middle East, and Africa. Despite the challenges, HF Sinclair returned $467 million to shareholders through dividends and share repurchases, ending the quarter with total liquidity of approximately $3.4 billion.
InvestingPro Insights
Recent InvestingPro data provides additional context to Mizuho Securities' outlook on HF Sinclair Corporation (NYSE:DINO). The company's P/E ratio of 7.88 and Price to Book ratio of 0.86 suggest that the stock may be undervalued, aligning with the current trading price near its 52-week low. This could indicate potential upside if the company overcomes its near-term challenges.
InvestingPro Tips highlight that DINO has maintained dividend payments for 37 consecutive years, with a current dividend yield of 4.49%. This consistent dividend history may provide some stability for investors during the anticipated operational difficulties. Moreover, the company's liquid assets exceed short-term obligations, which could help navigate the projected shortfalls in free cash flow.
It is worth noting that InvestingPro offers 10 additional tips for DINO, providing a more comprehensive analysis for investors considering the stock amidst current market conditions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.