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Valero Energy (VLO) Down 1.7% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Valero Energy Corporation (VLO - Free Report) . Shares have lost about 1.7% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Valero Energy Q1 Earnings Beat Estimates, Increase Y/Y

Valero Energy posted adjusted first-quarter 2017 income of $0.68 per share that surpassed the Zacks Consensus Estimate as well as the year-ago adjusted profit of $0.60.

Total revenue for the quarter grew 39% year over year to $21,772 million from $15,714 million. The top line was also above the Zacks Consensus Estimate of $20,100 million.

Higher throughput margin due to 91% throughput capacity utilization supported Valero Energy’s strong first-quarter results.

Throughput Volumes

During the quarter, refining throughput volumes were approximately 2.84 million barrels per day, almost in line with the year-earlier level.

By feedstock composition, sweet crude, medium/light sour crude and heavy sour crude accounted for 49.2%, 17.9% and 17.7%, respectively. The remaining volumes came from residuals, other feedstock as well as blendstocks and others.

The Gulf Coast accounted for approximately 60% of the total throughput volume. The Mid-Continent, North Atlantic and West Coast regions contributed 16%, 17% and 7%, respectively.

Throughput Margins

Company-wide throughput margins increased to $8.14 per barrel from the year-ago level of $7.66 per barrel. Throughput capacity utilization of 91% during the first quarter of this year supported the outperformance.

Average throughput margin realized was $7.98 per barrel in the U.S. Gulf Coast as against $7.63 per barrel in the year-earlier period. The metric was $7.98 per barrel in the U.S. Mid-Continent as against $6.53 a year ago. Throughput margin realized was $8.55 per barrel in the North Atlantic compared with $7.94 last year and $8.86 per barrel in the U.S. West Coast compared with $9.34 in the prior-year quarter.

Total operating cost per barrel was $5.61 during the quarter, up 8.5% from the year-earlier figure of $5.17. Refining operating expense per barrel was $3.85 compared with $3.46 in the year-ago quarter. Depreciation and amortization expenses increased 3% year over year to $1.76 per barrel.

Capital Expenditure & Balance Sheet

First-quarter capital expenditure was $641 million, including $245 million for turnarounds and catalyst expenditures. At the end of the quarter, the company had cash and temporary cash investments of $4.5 billion and debt of $8.5 billion. Valero also rewarded shareholders with dividends and share buybacks worth $629 million.

Guidance

For 2017, Valero reaffirmed its capital expenditure at $2.7 billion.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to two lower. While looking back an additional 30 days, we can see even more downward momentum. There have been three moves down and only one move up in the last two months.

Valero Energy Corporation Price and Consensus

 

VGM Scores

At this time, the stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with a 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for value investors than growth investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.


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