The U.S. economy grew slower than expected in the fourth quarter of 2022. Moreover, as macroeconomic uncertainties remain, it might be best to avoid energy stocks Delek Logistics Partners, LP (DKL) and Calumet Specialty Products Partners, L.P. (CLMT), which are running out of steam.
Since the start of the Russia-Ukraine war in February 2022, the energy market has been tight primarily due to supply uncertainty. Moreover, rising costs and project delays driven by supply chain disruption and trade policy uncertainty have damped the industry’s prospects.
Oil and gas companies are struggling with volatile costs and labor and material-supply uncertainties that threaten field operations and project delivery.
Moreover, the Federal Reserve raised interest rates for the ninth time this month, hiking rates by 0.25% and bringing the federal funds rate range to 4.75% - 5%, the highest rate since May 2006.
Slowing global economic growth and inflationary pressures will remain significant concerns in the near term.
The U.S. economy grew slower in the fourth quarter than initially estimated, as consumer spending continued to trail off. Also, following the collapse of Silicon Valley Bank, which roiled the banking industry, Goldman Sachs cut its outlook for economic growth this year by 0.3% points to 1.2%.
Take a detailed look at the stocks mentioned above:
Delek Logistics Partners, LP (DKL)
DKL owns and operates logistics and marketing assets for crude oil and intermediate and refined products in the United States. It operates through four segments: Gathering and Processing; Wholesale Marketing and Terminalling; Storage and Transportation; and Investment in Pipeline Joint Ventures.
DKL’s forward EV/Sales of 3.41x is 95.4% higher than the industry average of 1.74x. Its forward Price/Sales multiple of 1.91 is 56.1% higher than the industry average of 1.23. Its forward EV/EBITDA multiple of 9.87 is 99.4% higher than the industry average of 4.95.
Its trailing-12-month gross profit margin of 29.87% is 36.6% lower than the 47.1% industry average. Its trailing-12-month EBITDA margin of 27% is 20.9% lower than the 34.1% industry average.
DKL’s affiliate net revenue declined 5.6% year-over-year to $104.14 million during the fourth quarter that ended December 31, 2022. Its total operating costs and expenses increased 47.6% year-over-year to $207.43 million. Also, its net income per limited partner unit came in at $0.98.
Analysts expect DKL’s revenue to come in at $276.65 million for the current fiscal quarter ending March 2023. Its EPS is expected to come in at $1.19 for the same quarter.
The stock has declined 3.3% over the past six months to close its last trading session at $49.25.
DKL’s POWR Ratings reflect this bleak outlook. The stock has an overall D rating, equating to a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
DKL is also graded a D in Value. It is ranked last amongst 31 stocks in the MLPs - Oil & Gas industry.
In addition to the POWR Rating grades we’ve stated above, DKL’s rating for Sentiment, Growth, Stability, Momentum, and Quality can be seen here.
Calumet Specialty Products Partners, L.P. (CLMT)
CLMT manufactures, formulates, and markets slate of specialty branded products to various consumer-facing and industrial markets in North America and internationally.
CLMT’s forward EV/EBITDA multiple of 8.79 is 77.5% higher than the industry average of 4.95. Its forward EV/EBIT multiple of 12.22 is 64.1% higher than the industry average of 7.45.
The stock’s trailing-12-month gross profit margin of 7.90% is 83.2% lower than the 47.1% industry average. Its trailing-12-month EBITDA margin of 3.51% is 89.7% lower than the 34.1% industry average.
CLMT’s sales came in at $999.80 million during the fiscal fourth quarter that ended December 31, 2022. Its net loss available to partners came to $68.60 million in the same quarter. Also, the net loss per unit came in at $0.86.
Analysts expect CLMT’s revenue to decline 17.6% year-over-year to $905.04 million during the current fiscal quarter ending March 2023. Its EPS is expected to be $0.28 for the same quarter.
The stock has declined 63.7% over the past nine months, closing the last trading session at $17.01.
CLMT’s grim prospects are reflected in its POWR Ratings. The stock has an overall D rating, translating to a Sell in our POWR Ratings system.
CLMT has a D grade for Value and Quality. It is ranked #30 in the same industry.
To see the additional POWR Rating for Growth, Sentiment, Stability, and Momentum for CLMT, click here.
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DKL shares were trading at $49.02 per share on Friday afternoon, down $0.23 (-0.47%). Year-to-date, DKL has gained 10.56%, versus a 6.91% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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