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On Friday, JPMorgan analyst John Royall adjusted the price target for Delek US Holdings, Inc. (NYSE:DK), a downstream energy company, reducing it to $19.00 from the previous $20.00, while reiterating a Neutral rating on the stock. Currently trading at $18.56, the stock sits within the broader analyst target range of $10-23. The revision followed the company’s first-quarter results, which aligned with the analyst’s earnings projections. The share repurchase activity surpassed expectations, with over $30 million in buybacks, confirming an InvestingPro observation that management has been aggressively buying back shares.
Delek’s management continues to focus on strategies to enhance shareholder value, including the potential separation of its business units to unlock sum-of-the-parts (SOTP) value. With a concerning debt-to-equity ratio of 20.14 and an InvestingPro Financial Health Score rated as ’WEAK’, the company is actively working on cost reduction and operational efficiency through its Enhanced Oil Recovery (EOP) plan. Notably, Delek Logistics Partners (NYSE:DKL), Delek’s master limited partnership, has increased its third-party EBITDA to 80%, following a contract that effectively exchanges midstream EBITDA for refining EBITDA with Delek US.
The EOP initiatives have shown progress, particularly at the El Dorado facility and in general and administrative (G&A) expenses. Consequently, management has indicated potential improvements to the EOP plan, suggesting that the savings target may exceed the current high end of $80-120 million. This update implies that the official savings range might be revised upward in future quarters.
Despite a quarter marked by negative cash flow from operations (CFO) and significant maintenance activities, Delek’s capital allocation remains assertive. The company’s leadership expressed strong conviction in continuing to repurchase shares counter-cyclically, believing the current stock valuation to be attractive.
In light of these developments, Royall has opted to adjust the December 25 price target to $19 per share from $20, while maintaining a neutral position on Delek US Holdings’ stock.
In other recent news, Delek US Holdings, Inc. reported a net loss of $173 million, or -$2.78 per share, for the first quarter of 2025, with adjusted losses at $144 million, or -$2.32 per share, missing the expected EPS of -$1.81. However, the company surpassed revenue expectations, reaching $2.64 billion compared to the forecasted $2.57 billion. Mizuho (NYSE:MFG) analysts have upgraded Delek US’s stock rating from Neutral to Outperform, setting a new price target of $23.00. This upgrade is based on a review of the company’s earnings and a positive outlook on U.S. refining fundamentals. The analysts cited potential benefits from weakening global oil prices and strengthening U.S. natural gas prices. Despite the earnings miss, Delek US’s refining segment showed significant EBITDA growth, with a $42.2 million increase. The company maintained its capital expenditure guidance for 2025 and expects operating expenses to range between $215 million and $225 million in the second quarter. Additionally, Delek US is optimistic about receiving Small Refinery Exemptions from the EPA, which could positively impact future financials.
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