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

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.