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What's in Store for Valero Energy (VLO) in Q3 Earnings?
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Leading North American independent refiner and marketer of petroleum products, Valero Energy Corporation (VLO - Free Report) is set to report third-quarter 2016 results on Oct 25, before the market opens. Let’s see how things are shaping up prior to the announcement.
In the preceding three-month period, the company reported an earnings surprise of 5.94%. Coming to the earnings surprise history, Valero Energy beat estimates in three of the last four quarters.
Let’s see how things are shaping up for this announcement:
Although crude has improved significantly from mid-February lows, the commodity is still way below the level it was trading in mid-2014. Hence, refiners like Valero continue to benefit as their input costs remains low.
Valero is one of the leading refiners in the world with a low cost asset base. It refines cheaper, lower-quality oil and sells some of its yield to profitable international markets. The company has reduced its exposure to the East Coast markets, which are currently unprofitable. Most of the company's assets are concentrated in the profitable regions like Gulf Coast and Mid-Continent. We expect these strategic initiatives to bear fruit and drive the company’s earnings.
However, the company faces certain headwinds that might offset the positives discussed above. The demand for end products like gasoline remains weak as the commodity’s inventory continues to be above the upper limit of the average range. The company’s weak operating cash flow is another area of concern.
Earnings Whispers
Our proven model does not conclusively show that Valero Energy is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate for Valero Energy stand at 92 cents.
Zacks Rank: Valero Energy carries a Zacks Rank #3.
We caution against Sell-rated stocks (Zacks Rank #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Currently, the stock is trading at $54.54. We expect the earnings release to lead to stock movement.
Stocks to Consider
Though earnings beat looks uncertain for Valero Energy, here are some companies you may want to consider on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter:
Spectra Energy Corp. (SE - Free Report) has an Earnings ESP of +12.50% and a Zacks Rank #3. The company is expected to release earnings results on Nov 2.
Enterprise Products Partners LP (EPD - Free Report) has an Earnings ESP of +3.33% and a Zacks Rank #3. The company is expected to release earnings results on Oct 27.
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What's in Store for Valero Energy (VLO) in Q3 Earnings?
Leading North American independent refiner and marketer of petroleum products, Valero Energy Corporation (VLO - Free Report) is set to report third-quarter 2016 results on Oct 25, before the market opens. Let’s see how things are shaping up prior to the announcement.
In the preceding three-month period, the company reported an earnings surprise of 5.94%. Coming to the earnings surprise history, Valero Energy beat estimates in three of the last four quarters.
Let’s see how things are shaping up for this announcement:
VALERO ENERGY Price and EPS Surprise
VALERO ENERGY Price and EPS Surprise | VALERO ENERGY Quote
Factors to Consider
Although crude has improved significantly from mid-February lows, the commodity is still way below the level it was trading in mid-2014. Hence, refiners like Valero continue to benefit as their input costs remains low.
Valero is one of the leading refiners in the world with a low cost asset base. It refines cheaper, lower-quality oil and sells some of its yield to profitable international markets. The company has reduced its exposure to the East Coast markets, which are currently unprofitable. Most of the company's assets are concentrated in the profitable regions like Gulf Coast and Mid-Continent. We expect these strategic initiatives to bear fruit and drive the company’s earnings.
However, the company faces certain headwinds that might offset the positives discussed above. The demand for end products like gasoline remains weak as the commodity’s inventory continues to be above the upper limit of the average range. The company’s weak operating cash flow is another area of concern.
Earnings Whispers
Our proven model does not conclusively show that Valero Energy is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate for Valero Energy stand at 92 cents.
Zacks Rank: Valero Energy carries a Zacks Rank #3.
We caution against Sell-rated stocks (Zacks Rank #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Currently, the stock is trading at $54.54. We expect the earnings release to lead to stock movement.
Stocks to Consider
Though earnings beat looks uncertain for Valero Energy, here are some companies you may want to consider on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter:
Baker Hughes Inc. has an Earnings ESP of +9.09% and a Zacks Rank #2. The company is expected to release earnings results on Oct 25. You can see see the complete list of today’s Zacks #1 Rank stocks here.
Spectra Energy Corp. (SE - Free Report) has an Earnings ESP of +12.50% and a Zacks Rank #3. The company is expected to release earnings results on Nov 2.
Enterprise Products Partners LP (EPD - Free Report) has an Earnings ESP of +3.33% and a Zacks Rank #3. The company is expected to release earnings results on Oct 27.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>