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HF Sinclair Beats Q2 Estimates on Refining Strength, Plans Lubricants Spin-Off, TPH Says

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HF Sinclair (DINO) Q2 earnings beat estimates, buoyed by stronger-than-expected refining capture rates and robust performance in its lubricants and renewable diesel segments, TPH Energy strategists said in a note on Tuesday.

TPH analysts said that the independent refiner posted adjusted earnings of $5.31 per share for the quarter, outpacing the $4.51 consensus estimate. Its adjusted EBITDA came in at $1.48 billion, compared with the consensus expectation of $1.22 billion.

Refining earnings improved substantially quarter-over-quarter to $1.02 billion, bolstered by gross margins of $25.95 per barrel and an estimated capture rate of 91%, up from 85% in the previous quarter. Total sales volume reached 669,000 barrels per day.

TPH said that alongside the quarterly results, HF Sinclair announced it is pursuing a tax-free spin-off of its lubricants business by H1 2027. The lubricants unit has generated $431 million in EBITDA over the past 12 months.

Furthermore, the lubricants segment itself contributed $207 million in quarterly EBITDA, supported by surging base oil cracks and a $46 million FIFO benefit, despite sales volumes easing to 32,000 barrels per day.

Meanwhile, the renewables segment posted $123 million in EBITDA, reflecting strong profitability of $2.05 per gallon on a total run rate of 60 million gallons.

Marketing segment volumes rose 19% year-over-year to 387 million gallons, supported by new store growth, though EBITDA margins trimmed to 7 cents per gallon. Midstream performance remained flat at $112 million.

On the capital return front, HF Sinclair repurchased $175 million of shares during the quarter and raised its forward dividend by 5%. Together with its dividend distribution, the total capital return yield reached 9%.

Going forward, HF Sinclair noted that its refining indicator has climbed about $4.30 per barrel quarter-over-quarter heading into Q3, supported by strength in the Mid-Continent region.

TPH said that consensus analyst estimates for third-quarter earnings stand at $4.69 per share.

Price: $90.71, Change: $-0.07, Percent Change: -0.08%

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