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Valero (VLO) Q4 Earnings Beat, Renewable Fuel Demand to Rise
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Valero Energy Corporation (VLO - Free Report) reported fourth-quarter 2020 loss of $1.06 per share, narrower than the Zacks Consensus Estimate of a loss of $1.48. In the year-ago quarter, the company reported earnings of $2.13 per share.
Total revenues fell from $27,879 million in the prior-year period to $16,604 million. Moreover, the top line missed the Zacks Consensus Estimate of $18,318 million.
The narrower-than-expected loss can be attributed to lower cost of sales. The positives were partially offset by lower refinery throughput volumes, ethanol production and renewable diesel sales. Higher refining operating expenses also added to the woes.
Valero Energy Corporation Price, Consensus and EPS Surprise
Operating loss at the Refining segment was reported at $377 million against a profit of $1,419 million in the year-ago quarter. Lower refinery throughput volumes amid the coronavirus pandemic affected the segment.
In the Ethanol segment, it reported operating profit of $15 million compared with $36 million in fourth-quarter 2019. The downside was due to lower margins stemming from higher corn prices and reduced prices of ethanol. Moreover, production volumes averaged 4.1 million gallons per day, down 197 thousand gallons from the year-ago quarter.
Operating income at the Renewable Diesel segment decreased to $127 million from $541 million in the year-ago period owing to a decline in renewable diesel sales volumes. The segment sales averaged 618 thousand gallons per day for the fourth quarter, down from 844 thousand gallons in the year-ago period.
Cost of Sales
Total cost of sales decreased to $16,834 million from the year-ago figure of $25,876 million. Operating expenses, cost of materials, and general & administrative costs decreased year over year.
Throughput Volumes
For the quarter, refining throughput volumes were 2,550 thousand barrels per day (Mbpd), significantly down from the prior-year quarter’s 3,018 Mbpd.
In terms of feedstock composition, sweet crude, medium/light sour crude and heavy sour crude accounted for 49.3%, 12.4% and 14.4%, respectively, of its total volume. The remaining volumes came from residuals, other feedstock, and blendstocks and others.
The Gulf Coast contributed approximately 57.7% to total throughput volume. Mid-Continent, North Atlantic and West Coast regions accounted for 15.8%, 16.4% and 10.1%, respectively, of the total throughput volume.
Throughput Margins
Refining margin per barrel of throughput decreased to $4.64 from the year-ago level of $10.90. Refining operating expense per barrel was $4.40 compared with $3.93 in the year-ago quarter. Depreciation and amortization expenses increased to $2.27 a barrel from $1.89 in the prior-year quarter. As such, adjusted refining operating loss was recorded at $2.03 per barrel of throughput against the year-ago profit of $5.08.
Capital Investment & Balance Sheet
Fourth-quarter capital investment totaled $622 million. Of the total amount, $214 million was allotted for sustaining the business. Through the December quarter, the leading independent refiner and marketer of petroleum products returned $400 million to stockholders as dividend payments.
At quarter-end, Valero had cash and cash equivalents of $3,313 million, lower than the third-quarter level of $4,047 million. As of Dec 31, 2020, it had a total debt of $14,677 million compared with $15,213 million in the third quarter. Its debt to capitalization was 43.8%.
Guidance
The company expects capital investment for this year to be $2 billion. Of the total, 60% will likely be used for business sustaining purposes and the rest will be utilized for growth projects. Notably, around 50% of its growth capital will be allotted for the renewable diesel business’ expansion.
Valero expects the Diamond Pipeline expansion and Pembroke Cogen project to come online in the fourth and third quarter of 2021, respectively. The Port Arthur Coker project is scheduled to be completed in 2023. The company intends to quadruple renewable diesel production capacity by 2023. With low-carbon fuel policies being adopted by economies around the globe, demand for renewable fuel is expected to increase in the coming days.
Cactus’ bottom-line estimates for 2021 have increased nearly 14% in the past 60 days.
Suncor’s sales for 2021 are expected to increase 16.5% year over year.
Ameresco’s bottom line for 2021 is expected to increase 19.6% year over year.
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Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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Valero (VLO) Q4 Earnings Beat, Renewable Fuel Demand to Rise
Valero Energy Corporation (VLO - Free Report) reported fourth-quarter 2020 loss of $1.06 per share, narrower than the Zacks Consensus Estimate of a loss of $1.48. In the year-ago quarter, the company reported earnings of $2.13 per share.
Total revenues fell from $27,879 million in the prior-year period to $16,604 million. Moreover, the top line missed the Zacks Consensus Estimate of $18,318 million.
The narrower-than-expected loss can be attributed to lower cost of sales. The positives were partially offset by lower refinery throughput volumes, ethanol production and renewable diesel sales. Higher refining operating expenses also added to the woes.
Valero Energy Corporation Price, Consensus and EPS Surprise
Valero Energy Corporation price-consensus-eps-surprise-chart | Valero Energy Corporation Quote
Segmental Performance
Operating loss at the Refining segment was reported at $377 million against a profit of $1,419 million in the year-ago quarter. Lower refinery throughput volumes amid the coronavirus pandemic affected the segment.
In the Ethanol segment, it reported operating profit of $15 million compared with $36 million in fourth-quarter 2019. The downside was due to lower margins stemming from higher corn prices and reduced prices of ethanol. Moreover, production volumes averaged 4.1 million gallons per day, down 197 thousand gallons from the year-ago quarter.
Operating income at the Renewable Diesel segment decreased to $127 million from $541 million in the year-ago period owing to a decline in renewable diesel sales volumes. The segment sales averaged 618 thousand gallons per day for the fourth quarter, down from 844 thousand gallons in the year-ago period.
Cost of Sales
Total cost of sales decreased to $16,834 million from the year-ago figure of $25,876 million. Operating expenses, cost of materials, and general & administrative costs decreased year over year.
Throughput Volumes
For the quarter, refining throughput volumes were 2,550 thousand barrels per day (Mbpd), significantly down from the prior-year quarter’s 3,018 Mbpd.
In terms of feedstock composition, sweet crude, medium/light sour crude and heavy sour crude accounted for 49.3%, 12.4% and 14.4%, respectively, of its total volume. The remaining volumes came from residuals, other feedstock, and blendstocks and others.
The Gulf Coast contributed approximately 57.7% to total throughput volume. Mid-Continent, North Atlantic and West Coast regions accounted for 15.8%, 16.4% and 10.1%, respectively, of the total throughput volume.
Throughput Margins
Refining margin per barrel of throughput decreased to $4.64 from the year-ago level of $10.90. Refining operating expense per barrel was $4.40 compared with $3.93 in the year-ago quarter. Depreciation and amortization expenses increased to $2.27 a barrel from $1.89 in the prior-year quarter. As such, adjusted refining operating loss was recorded at $2.03 per barrel of throughput against the year-ago profit of $5.08.
Capital Investment & Balance Sheet
Fourth-quarter capital investment totaled $622 million. Of the total amount, $214 million was allotted for sustaining the business. Through the December quarter, the leading independent refiner and marketer of petroleum products returned $400 million to stockholders as dividend payments.
At quarter-end, Valero had cash and cash equivalents of $3,313 million, lower than the third-quarter level of $4,047 million. As of Dec 31, 2020, it had a total debt of $14,677 million compared with $15,213 million in the third quarter. Its debt to capitalization was 43.8%.
Guidance
The company expects capital investment for this year to be $2 billion. Of the total, 60% will likely be used for business sustaining purposes and the rest will be utilized for growth projects. Notably, around 50% of its growth capital will be allotted for the renewable diesel business’ expansion.
Valero expects the Diamond Pipeline expansion and Pembroke Cogen project to come online in the fourth and third quarter of 2021, respectively. The Port Arthur Coker project is scheduled to be completed in 2023. The company intends to quadruple renewable diesel production capacity by 2023. With low-carbon fuel policies being adopted by economies around the globe, demand for renewable fuel is expected to increase in the coming days.
Zacks Rank & Stocks to Consider
The company currently has a Zacks Rank #4 (Sell). Some better-ranked players in the energy space include Cactus, Inc. (WHD - Free Report) , Suncor Energy Inc. (SU - Free Report) and Ameresco, Inc. (AMRC - Free Report) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cactus’ bottom-line estimates for 2021 have increased nearly 14% in the past 60 days.
Suncor’s sales for 2021 are expected to increase 16.5% year over year.
Ameresco’s bottom line for 2021 is expected to increase 19.6% year over year.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot stocks we're targeting >>