DKL

We rate Delek Logistics Partners, LP (DKL) as a Reduce with a composite score of 47.3/100 at a current price of $53.50. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in stability (72th percentile) and momentum (68th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (21th percentile) and value (31th percentile) tempers our overall conviction. We assign a No Moat rating (23/100), Medium uncertainty, and Standard capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends; balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Delek Logistics Partners, LP holds a top-quartile position (#0 of 50) within the Transportation, Communications, Electric, Gas, And Sanitary Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 47.3/100 places it at rank #2446 in our full 7,333-stock universe. At $2.4B in market capitalization, Delek Logistics Partners, LP is a mid-cap player in the Transportation, Communications, Electric, Gas, And Sanitary Services space, which limits certain scale advantages but may allow for more agile strategic execution.

Despite positive momentum (68th percentile), revenue contraction of -1% creates a divergence between price action and fundamental trajectory. This divergence suggests either that the market is looking through near-term weakness or that technical factors are temporarily inflating the stock. Investors should assess whether the revenue decline reflects cyclical weakness or structural challenges.

The margin cascade tells an important story: gross margins of 23% (-32.5pp vs sector) narrow to operating margins of 18% (+0.6pp vs sector) and net margins of 16.7%, yielding a gross-to-net conversion rate of 74%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $53.50, Delek Logistics Partners, LP is trading at a premium to fundamental value. Our value factor score of 31/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at a P/E of 17.9x (roughly in line with the sector median of 16.9x), EV/EBITDA of 28.7x (at a premium), P/B of 167.0x, P/S of 3.0x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a Medium uncertainty rating to Delek Logistics Partners, LP. The stock presents a balanced risk profile: significant leverage (13097% debt-to-equity) and low beta of 0.57 — while defensive, this may indicate limited upside participation in bull markets. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: significant leverage (13097% debt-to-equity); low beta of 0.57 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 72th percentile and quality factor at the 40th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (72th percentile) suggests predictable business dynamics; a 9.97% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Delek Logistics Partners, LP's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 932.0%, and the balance sheet is managed within acceptable parameters (D/E: 13097%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; Delek Logistics Partners, LP falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 9.97% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, Delek Logistics Partners, LP receives a Reduce rating with a composite score of 47.3/100 (rank #2446 of 7,333). Our quantitative framework assigns a No Moat (23/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 46/100.

Our analysis does not support a constructive view on Delek Logistics Partners, LP at this time. The combination of limited competitive advantages, medium uncertainty, and standard capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.