In morning trade the Caltex Australia Limited (ASX: CTX) share price has been smashed following the release of its profit guidance for the year ending December 31.
At the time of writing the fuel retailer's shares are down 7% to $25.13.
What does Caltex expect to report in FY 2018?
According to the release, the company's Fuels & Infrastructure segment is expected to deliver an EBIT result in the range of $560 million to $580 million for FY 2018. This compares to a segment EBIT of $666 million in FY 2017.
The reason for the decline in EBIT has been the underperformance of the Lytton refinery this year. This business is expected to post a 51% decline in EBIT in FY 2018 due largely to a lower Caltex Refer Margin and an unplanned outage in October.
Excluding this business, the Fuels & Infrastructure business would have posted an increase of approximately 21% year on year.
Another drag on its results this year has been its Convenience Retail segment which is expected to post EBIT of between $295 million and $305 million in FY 2018. While this is ahead of its previous guidance, it will be a decline from $334 million a year earlier.
The segment has outperformed previous guidance due to the favourable impact of falling crude and product prices in the fourth quarter.
As a result of this, the company advised that it expects Replacement Cost Operating Profit (RCOP) net profit after tax to be between $533 million and $553 million in FY 2018, compared with the consensus estimate of $552 million and FY 2017's $638 million.
Should you invest?
While FY 2018 looks set to be a disappointing year for Caltex, I think its shares have fallen to an attractive level today.
At under 12x estimated full year earnings, I think Caltex could be a good option considering the recent pullback in oil prices and its plans to expand its Convenience Retail business significantly over the coming years.
In light of this, I would sooner buy its shares ahead of energy producer's such as Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL).
