Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 10 Jan, 25 | DK | Buy | USD 18.4 | USD 20.06 | USD 21.53 | 5 days | 17.0% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Delek US Holdings, Inc. engages in the integrated downstream energy business in the United States. The company operates through Refining, Logistics, and Retail segments. The Refining segment processes crude oil and other feedstock for the manufacture of various grades of gasoline, diesel fuel, aviation fuel, asphalt, and other petroleum-based products that are distributed through owned and third-party product terminal. It owns and operates refineries located in Tyler, Texas; El Dorado, Arkansas; Big Spring, Texas; and Krotz Springs, Louisiana, as well as biodiesel facilities in Crossett, Arkansas, Cleburne, Texas, and New Albany, Mississippi. The Logistics segment gathers, transports, and stores crude oil, intermediate, and refined products; and markets, distributes, transports, and stores refined products, as well as disposes and recycles water for third parties. It owns or leases crude oil transportation pipelines, refined product pipelines, crude oil gathering systems, and associated crude oil storage tanks; and owns and operates light product distribution terminals, as well as markets light products using third-party terminals. The Retail segment owns and leases convenience store sites located primarily in West Texas and New Mexico. Its convenience stores offer various grades of gasoline and diesel under the DK or Alon brand; and food products and service, tobacco products, non-alcoholic and alcoholic beverages, and general merchandise, as well as money orders to the public primarily under the 7-Eleven and DK or Alon brand names. It serves oil companies, independent refiners and marketers, jobbers, distributors, utility and transportation companies, government, and independent retail fuel operators. Delek US Holdings, Inc. was founded in 2001 and is headquartered in Brentwood, Tennessee.
Strong Logistics Segment Growth: The logistics segment achieved a record adjusted EBITDA of $106.1 million in Q3 2024, representing a 10% increase from $96.5 million in Q3 2023.
Cash Position Improvement: Delek US maintained a solid cash balance of $1,037.6 million as of September 30, 2024, with a net cash position of $135.2 million (excluding Delek Logistics), reflecting financial flexibility despite challenging market conditions.
Decline in Refining Segment Performance: The refining segment's adjusted EBITDA dropped sharply from $296.1 million in Q3 2023 to $10.2 million in Q3 2024, reflecting a significant decline due to reduced refining crack spreads, which were down 49.1% year-over-year.
Net Loss: Delek US reported a net loss of $76.8 million, or $(1.20) per share, compared to a net income of $128.7 million, or $1.97 per share, in Q3 2023.
Delek US faces risks from refining margin volatility, high debt, execution challenges in strategic plans, and reliance on midstream operations.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 18.4 | 16.01 | 20.06 | 21.53 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Financial Performance: Delek US Holdings, Inc. (NYSE: DK) ("Delek US" or "the Company") reported a net loss of $76.8 million, or $(1.20) per diluted share, for the third quarter ended September 30, 2024, compared to a net income of $128.7 million, or $1.97 per diluted share, in the same period in 2023. Adjusted net loss for the quarter was $93.0 million, or $(1.45) per diluted share, compared to an adjusted net income of $131.9 million, or $2.02 per diluted share, in the prior-year quarter. Adjusted EBITDA for the third quarter stood at $70.6 million, a decrease from $345.1 million in Q3 2023, reflecting the challenging market conditions.
Strategic Progress: Delek US advanced its "Sum of the Parts" (SOTP) strategy during Q3 2024, including the sale of its retail assets for $390 million and the completion of intercompany amendments and extensions between Delek US and Delek Logistics Partners (DKL). The Company also finalized the dropdown of the Wink to Webster (W2W) pipeline into DKL and facilitated DKL’s acquisition of H2O Midstream, which is expected to strengthen third-party cash flows. These efforts align with Delek US's focus on operational improvements and cost reductions.
Enterprise Optimization Plan: The Company announced its Enterprise Optimization Plan (EOP), which is expected to enhance profitability by at least $100 million annually. CEO Avigal Soreq emphasized the Company's commitment to increasing free cash flow generation and maximizing the value of third-party businesses at Delek Logistics as part of the ongoing SOTP strategy. Delek US remains focused on maintaining safe and reliable operations, advancing EOP initiatives, and delivering shareholder value.
Segment Performance: Refining: The refining segment reported an adjusted EBITDA of $10.2 million for Q3 2024, a significant decline from $296.1 million in Q3 2023. The drop was attributed to lower refining crack spreads, with benchmark crack spreads falling by an average of 49.1% year-over-year. Inventory impacts also played a role, with adjustments of $25.8 million in 2024 compared to $(28.2) million in the prior year.
Segment Performance: Logistics: The logistics segment achieved record performance in Q3 2024, with adjusted EBITDA reaching $106.1 million, up from $96.5 million in the prior-year quarter. Growth was driven by robust contributions from Delaware Gathering systems, annual rate increases, and the impact of the W2W dropdown, further solidifying the segment's importance to Delek US's strategy.
Corporate and Other Activities: Corporate and other activities recorded an adjusted EBITDA loss of $(53.9) million in Q3 2024, an improvement from the $(63.9) million loss in Q3 2023. This improvement was largely due to reduced employee-related expenses, partially offset by the impacts of the W2W dropdown. The Company continues to focus on reducing costs and optimizing its operations.
Shareholder Returns and Liquidity: The Board of Directors declared a regular quarterly dividend of $0.255 per share, payable on November 18, 2024, to shareholders of record as of November 12, 2024. As of September 30, 2024, Delek US reported a cash balance of $1,037.6 million and total consolidated long-term debt of $2,789.4 million, resulting in a net debt position of $1,751.8 million. Excluding Delek Logistics, Delek US held $1,030.3 million in cash and $895.1 million in long-term debt, resulting in a $135.2 million net cash position.
Outlook: Delek US remains committed to executing its operational and financial priorities, including the midstream deconsolidation efforts, enhancing profitability through the EOP, and maintaining financial strength. With a focus on delivering shareholder value and strategic growth, the Company is positioned to navigate current market challenges effectively.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Energy Industry: Oil & Gas Refining & Marketing
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| DK Delek US Energy Inc |
-0.01 0.07% | 15.06 | - | 20.33 | 0.09 | 1.82 | 0.23 | 11.43 |
| PSX Phillips 66 |
-1.19 0.96% | 122.29 | 8.10 | 9.57 | 0.39 | 1.91 | 0.50 | 5.71 |
| MPC Marathon Petroleum Corp |
-1.34 0.92% | 144.35 | 5.69 | 11.07 | 0.38 | 2.26 | 0.49 | 3.55 |
| VLO Valero Energy Corporation |
-0.95 0.72% | 131.12 | 4.54 | 9.21 | 0.31 | 1.74 | 0.34 | 2.87 |
| NTOIF Neste Oyj |
- -% | 10.23 | 16.56 | 10.27 | 1.22 | 3.18 | 1.31 | 16.26 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is January 09, 2025. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
Disclaimer :
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