Even though a stock shows an impressive run on the bourse, some investors may steer clear of adding it to their portfolios, thinking there is not much upside left for further growth. While this is true in certain cases, a high-flying company still necessarily mean that it's a meatier option for bargain right now.
In case of HollyFrontier Corporation HFC, there are seven good reasons to buy the stock despite having an amazing run already.
Therefore, if you are still thinking of taking advantage of this stock price rally, it’s time that you invest in it for your portfolio boost. Let’s assess the factors why HollyFrontier has enough momentum to carry on with.
What Makes This Bet Lucrative
An Outperformer
A glance at the company’s price movement shows that the stock had an impressive run on the bourse in the past six months. Shares of HollyFrontier have surged 32.1%, outperforming its industry’s 28.1% growth. Importantly, the stock price rally is backed by solid fundamentals, which should lead to long-term earnings growth.
Solid Rank & VGM Score
This leading independent refiner and marketer of petroleum products in the United States currently has a Zacks Rank #2 (Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best investment opportunities. Thus, the company appears to be a compelling investment proposition at the moment.
Upbeat Q3 Performance
HollyFrontier recently reported third-quarter net income per share (excluding special items) of $1.68, beating the Zacks Consensus Estimate of $1.43, attributable to robust performance from stronger throughput volumes.
Moreover, revenues of $4.42 billion surpassed the Zacks Consensus Estimate of $4.33 billion.
Northbound Estimate Revisions
The direction of estimate revisions serves as an important pointer in terms of stock price performance. The Zacks Consensus Estimate for 2019 earnings has been revised 7.23% upward over the past 60 days. Earnings estimates for 2020 have moved 1.55% north.
Excellent Earnings Surprise History
HollyFrontier flaunts a stellar surprise track. Its earnings exceeded the Zacks Consensus Estimate in all the trailing four quarters, the average being 27.77%. So, investors take this into consideration while betting on the stock with expectation that the company will keep its beat streak alivein the upcoming releases as well.
Strong Balance Sheet & Shareholder-Friendly Moves
As of Sep 30, the U.S. refiner HollyFrontier had approximately $981.9 million in cash and cash equivalents and $2.4 billion in long-term debt, representing a debt-to-capitalization ratio of 27.04%.
Additionally, the company has plans to increase its shareholder returns by raising its regular dividend. Further, it initiated a new $1-billion stock repurchase program, substituting all the existing share buyback authorizations with nearly $281 million remaining.
This Texas-based refiner recently announced a 6% hike in its regular quarterly dividend to 35 cents per share, payable Dec 11 to its stockholders of record as of Nov 27, 2019. In the coming years, HollyFrontier targets a dividend raise of 5% annually.
Key Catalysts
HollyFrontier is one of the largest independent oil refiners in the United States with a combined crude oil processing capacity of approximately 457,000 barrels per day. A major advantage for the company is its high complexity index — the capability to process a wide mix of crude — and access to some of the fastest-growing domestic markets afforded by its portfolio of six refineries.
HollyFrontier has been executing its strategy to drive business growth and maximize returns to its shareholders. To this end, it intends to build a renewable diesel unit (RDU) at its Artesia refinery in New Mexico.
Zacks Rank & Other Key Picks
Some other top-ranked stocks in the energy space are World Fuel Corporation INT, Parker Drilling Company PKD and FuelCell Energy, Inc. FCEL, each carrying the same Zacks Rank as HollyFrontier. You can see the complete list of today’s Zacks #1 Rank stocks here.
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