Still Holding Delek US Stock? Here's Why That's Justified

Over the past 12 months, Delek US Holdings, Inc. DK has significantly outperformed both the Oil Refining & Marketing sub-industry (ZSI128M) and the broader Oils & Energy sector (ZS12M). DK's share price grew an impressive 69%, far surpassing the Oil Refining & Marketing sub-industry's growth of just 14.4%. Additionally, the broader Oils & Energy sector saw a more modest increase of 7.5%. This remarkable performance highlights DK's strong growth relative to its industry peers and the overall market in the energy sector.

One-Year Stock Performance Overview

Brentwood, TN-based oil and gas refining and marketing company is a major player in the U.S. downstream sector, producing gasoline, diesel and jet fuel, while also managing the logistics network that transports these products throughout its system. Its strategically placed refineries and integrated midstream assets are essential for maintaining the stability of the national fuel supply. Like many refiners, Delek’s financial performance is influenced by fluctuations in crude oil prices, refining margins and general market conditions, requiring investors to weigh long-term growth potential against short-term market volatility.

As the industry evolves, Delek remains a prominent focus for those exploring opportunities in the downstream market. Given its historical performance cycles, an important question arises, is now the right time to buy, hold or wait?

Delving into the factors influencing Delek’s market performance can provide clarity on whether the stock has upside potential or if waiting for the right opportunity might be the best course.

Strengths That Make DK a Strong Investment

Proactive Shareholder Returns and Strong Balance Sheet: The company demonstrates a commitment to returning capital, paying $15.3 million in dividends and repurchasing approximately $15 million of its shares during the third quarter of 2025. It boasts the highest total return yield among refining peers over the last 12 months. Furthermore, DK’s standalone net debt is a manageable $265 million, providing financial strength.

Structural Improvements in Wholesale Marketing: The wholesale business contributed approximately $70 million in the third quarter of 2025, driven by structural Enterprise Optimization Plan ("EOP") initiatives like renegotiated contracts, optimized logistics and strategic market exits and entries. This transformation is designed to reduce dependence on specific geographic spreads and create a more repeatable, higher-margin earnings stream.

Leading Position in Permian Sour Gas Opportunity: The company is ahead of the curve in providing a comprehensive sour gas solution in the Delaware Basin through Delek Logistics. The accelerated sour gas program and the Libby 2 plant are expected to fill quickly, potentially requiring earlier-than-expected capacity expansion. This positions the midstream segment for sustained growth driven by producer needs.

Positive Fourth Quarter 2025 Outlook and Distillate Strength: Management indicated a strong start to the fourth quarter from an EOP perspective and highlighted the company's high distillate yield system (42%) at a time when distillate cracks are showing strength. This positions DK to potentially capture favorable market conditions in the closing quarter of the year.

Potential Risks That Could Put Pressure on DK’s Shares

High and Increasing Operating Expenses: Operating expenses are projected to be between $205 million and $220 million for the fourth quarter of 2025, indicating increased costs associated with the ramp-up of the new Delek Logistics Partners (“DKL”) plant. Rising operating costs can compress refining margins, especially if crack spreads weaken, potentially offsetting the gains from the EOP initiatives.

Complex Corporate Structure With Intercompany Dependencies: The relationship between DK and Delek Logistics, involving intercompany agreements, leases and dropdowns, adds complexity. While aimed at making them economically independent, accounting changes (like lease reclassifications) and intercompany eliminations make it challenging to analyze the pure performance of each entity separately.

Exposure to Cyclical and Volatile Refining Margins: Despite EOP improvements, Delek US' profitability remains closely tied to crack spreads, which are inherently volatile and influenced by global crude oil prices, demand dynamics and geopolitics. A sustained downturn in refining margins could quickly erode the gains from operational improvements.

Core Revenues Decline Year Over Year: DK reported third-quarter 2025 revenues of $2.89 billion, which represents a 5.11% decrease compared with the same period in the prior year. This decline in the top line, despite one-time benefits, may indicate underlying challenges in volume or pricing within its core refining and marketing operations in a competitive market environment.

Final Thoughts for DK Stock

DK is demonstrating strong financial discipline with proactive shareholder returns, a solid balance sheet and strategic improvements in its wholesale marketing business, which contributed significantly in third-quarter 2025. The company also holds a leading position in the Permian sour gas market and its positive outlook for fourth-quarter 2025, coupled with strong distillate yield, suggests potential for growth.

However, rising operating expenses, particularly related to the ramp-up of the new DKL plant, could pressure margins if crack spreads weaken. Additionally, the company’s complex corporate structure and exposure to volatile refining margins, along with a decline in core revenues, introduce risks that investors should consider. Given this mix of strengths and potential challenges, investors should wait for a more opportune entry point instead of adding this Zacks Rank #3 (Hold) stock to their portfolios.

Key Picks

Investors interested in the energy sector might look at some better-ranked stocks like USA Compression Partners USAC, Oceaneering International OII and Suncor Energy SU, sporting a Zacks Rank #1 (Strong Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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