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What's in Store for Valero Energy (VLO) in Q2 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 second-quarter 2017 results on Jul 27, before the opening bell.

The company surpassed the Zacks Consensus Estimate in all of the last four quarters with an average earnings beat of 16.25%.

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 3.1 million barrels per day in its 15 refineries across the U.S., Canada and the Caribbean. We note that the company is favorably positioned to benefit 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 second quarter of this year with a decline of 4.7%, the pricing environment of commodities 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 a price hike.  

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 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $1.08. 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 0.00% 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 have underperformed the industry during the April–June quarter of this year, it remains to be seen how the stock performs after the earnings release.

Stocks to Consider

Here are some firms that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat this quarter:

TransCanada Corporation (TRP - Free Report) has an Earnings ESP of + 7.84% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here

Boardwalk Pipeline Partners LP has an Earnings ESP of +6.90% and a Zacks Rank #2.

The Williams Companies Inc (WMB - Free Report) has an Earnings ESP of + 15.79% and a Zacks Rank #2.

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