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Oil Refining Q2 Earnings on Aug 3: TSO, MUSA, HFC, DK

We are now approaching the end of the earnings season, with 63.4% of the S&P 500 members having reported already (as of Jul 29). This week 116 S&P 500 members are coming up with results.

Q2 Snapshot to Date

We now have second-quarter results from 317 S&P 500 members that combined account for 73.5% of the index's total market capitalization. Total earnings for these companies are down 3.3% from the same period last year while revenues are down 0.9%. Coming to the beat ratio, 72.9% came up with positive earnings surprises and 53.6% beat revenue estimates as per the Earnings Preview report dated Jul 29.

Energy Sector During Q2

Expectedly, the 'Energy' sector has been a big drag on the aggregate growth picture. For the sector components on the S&P 500 index that have reported second-quarter results, total earnings are down 76.5% on 24.6% lower revenues.

But the Energy sector's results are so far better than expected, with 66.7% of companies beating earnings estimates.

How was Q2 for Refiners?

The second quarter saw crude advancing more than 26% sequentially − the best quarterly percentage gain in seven years. Throughout the quarter, oil price improved significantly from mid-February, when West Texas Intermediate (WTI) crude fell to a 12-year low mark of $26.05 per barrel. Moreover, in June, oil prices settled above the psychologically important $50 per barrel level for the first time in more than 10 months.

This news did not favor refiners as they have to buy raw crude to produce refined petroleum products like gasoline. With the rise in price, black gold has become costlier for refiners and has in turn led to higher input cost.

Let's take a look at the expected earnings performance of four refining players that are expected to post second-quarter results on Aug 3.

Tesoro CorporationTSO − one the largest independent oil refiners in the U.S − posted a positive earnings surprise of 14.42% last quarter. Moreover, over the last four quarters, the company's average positive surprise was 6.08%.

However, an earnings beat is uncertain for Tesoro this time around. This is because, as per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat estimates. We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

For the quarter to be reported, Tesoro as an Earnings ESP of 0.00%, while it carries a Zacks Rank #5. (Read more: Tesoro Corporation: What to Expect in Q2 Earnings? )

TESORO CORP Price and EPS Surprise

TESORO CORP Price and EPS Surprise | TESORO CORP Quote

Murphy USA Inc . MUSA delivered an average negative surprise of 12.74% for the trailing four quarters. On top of that, our model does not indicate that the company is likely to beat on earnings this time around. This is because Murphy USA is a Zacks Rank #2 stock and carries an Earnings ESP of 0.00%.

MURPHY USA INC Price and EPS Surprise

MURPHY USA INC Price and EPS Surprise | MURPHY USA INC Quote

HollyFrontier CorporationHFC surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average beat of 3.74%. However, our proprietary model is not showing the possibility of an earnings beat this quarter. This is because the company carries a Zacks Rank #5 and has an Earnings ESP of 0.00%.

HOLLYFRONTIER Price and EPS Surprise

HOLLYFRONTIER Price and EPS Surprise | HOLLYFRONTIER Quote

Delek US Holdings Inc . DK delivered an average negative earnings surprise of 19.18% over the last four quarters. Moreover, we are not expecting an earnings beat for Delek US Holdings this quarter as it has a combination of an Earnings ESP of 0.00% and a Zacks Rank #5.

DELEK US HLDGS Price and EPS Surprise

DELEK US HLDGS Price and EPS Surprise | DELEK US HLDGS Quote

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MURPHY USA INC (MUSA): Free Stock Analysis Report

TESORO CORP (TSO): Free Stock Analysis Report

DELEK US HLDGS (DK): Free Stock Analysis Report

HOLLYFRONTIER (HFC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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