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What's in Store for Valero Energy (VLO) in Q1 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 first-quarter 2017 results on Apr 25, before the opening bell.

The company surpassed the Zacks Consensus Estimate in three of the last four quarters with an average earnings beat of 8.46%. Let’s see how things are shaping up prior to the announcement.

Factors to Consider

Valero Energy has the most diversified refinery base among independent refiners, with a capacity of 3 million barrels per day in its 15 refineries across the U.S., Canada and the Caribbean. We note that the company is best positioned to profit from increased refining margins, mainly due to its strategic refinery structure that enables it to use cheaper oil for more than half of its needs.

Although crude ended the first quarter of this year 5.8% lower, the pricing environment of commodity prices was much healthier than the year-ago quarter, courtesy of the historical OPEC agreement. Improvement in oil prices is definitely not favorable for Valero as the input cost for refiners increase with the rise in oil prices.  

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: Valero Energy currently has an Earnings ESP of -1.64% as the Most Accurate Estimate of 60 cents is lower than the Zacks Consensus Estimate of 61 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.   

Zacks Rank: Valero Energy carries a Zacks Rank #3, which increases the predictive power. However, the company’s negative Earnings ESP makes surprise prediction inconclusive.

Conversely, the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

Though the company’s shares outperformed the Zacks categorized Oil Refining & Marketing industry during the January–March quarter of this year, it remains to be seen how the stock performs after the earnings release.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Antero Resources Corporation (AR - Free Report)   has an Earnings ESP of +100.00% and a Zacks Rank #1. The company is expected to release earnings on Apr 26. You can see the complete list of today’s Zacks #1 Rank stocks here.

Chesapeake Energy Corp. (CHK - Free Report) has an Earnings ESP of +31.58% and a Zacks Rank #3. The company is expected to release earnings on May 4.

Southwestern Energy Company (SWN - Free Report) has an Earnings ESP of +11.77% and a Zacks Rank #3. The company is expected to release earnings on Apr 27.

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