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What Lies Ahead for Valero With Prevailing Softness in Crude Price
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Key Takeaways
VLO operates a wide refinery network capable of processing heavy sour, medium/light sour and sweet crude.
Valero benefits from lower crude prices, as cheaper feedstocks lift refining margins.
VLO is positioned to gain as the EIA forecasts crude prices falling from 2025 through 2027.
Valero Energy Corporation (VLO - Free Report) is a prominent name in the downstream energy sector. With a strong foothold in the refining sector, the company boasts a robust network of refineries that is capable of processing a wide range of feedstocks, including heavy sour, medium/light sour and sweet crude into higher-value refined products.
Per oilprice.com, the benchmark West Texas Intermediate crude price is hovering a little above $60 per barrel, a significant drop from the year-ago price of $75.44. The overall downstream energy sector is enjoying a favorable business environment.
The U.S. Energy Information Administration (EIA), in its latest Short-Term Energy Outlook, expects crude prices to be around $52.21 per barrel in 2026, a sharp decline from $65.40 recorded in 2025. Prices may further fall to $50.36 per barrel in 2027.
Driven by its business model, VLO benefits from relatively weaker crude prices, as it can purchase inputs for conversion into higher-value refined products at a lower cost. As crude prices are forecast to decline further in the coming years, according to the EIA, downstream players are expected to see a sharp increase in profit margins, which should strengthen their balance sheets.
PSX & PBF Poised to Gain From Soft Crude Prices, Similar to VLO
Phillips 66 (PSX - Free Report) and PBF Energy Inc. (PBF - Free Report) are two other downstream players whose business models are exposed to crude price volatility. The business models of PSX and PBF are also likely to gain from the soft crude price environment. Like VLO, PSX and PBF also have the capability to process a diverse range of feedstocks.
VLO’s Price Performance, Valuation & Estimates
Shares of Valero have rallied 39.3% over the past year compared with the 15.3% gain of the composite stocks belonging to the industry.
Image Source: Zacks Investment Research
From a valuation standpoint, VLO trades at a trailing 12-month enterprise-value-to-EBITDA (EV/EBITDA) of 9.08X. This is above the composite stocks' average of 4.56X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for VLO’s 2025 earnings has remained constant over the past seven days.
Image: Shutterstock
What Lies Ahead for Valero With Prevailing Softness in Crude Price
Key Takeaways
Valero Energy Corporation (VLO - Free Report) is a prominent name in the downstream energy sector. With a strong foothold in the refining sector, the company boasts a robust network of refineries that is capable of processing a wide range of feedstocks, including heavy sour, medium/light sour and sweet crude into higher-value refined products.
Per oilprice.com, the benchmark West Texas Intermediate crude price is hovering a little above $60 per barrel, a significant drop from the year-ago price of $75.44. The overall downstream energy sector is enjoying a favorable business environment.
The U.S. Energy Information Administration (EIA), in its latest Short-Term Energy Outlook, expects crude prices to be around $52.21 per barrel in 2026, a sharp decline from $65.40 recorded in 2025. Prices may further fall to $50.36 per barrel in 2027.
Driven by its business model, VLO benefits from relatively weaker crude prices, as it can purchase inputs for conversion into higher-value refined products at a lower cost. As crude prices are forecast to decline further in the coming years, according to the EIA, downstream players are expected to see a sharp increase in profit margins, which should strengthen their balance sheets.
PSX & PBF Poised to Gain From Soft Crude Prices, Similar to VLO
Phillips 66 (PSX - Free Report) and PBF Energy Inc. (PBF - Free Report) are two other downstream players whose business models are exposed to crude price volatility. The business models of PSX and PBF are also likely to gain from the soft crude price environment. Like VLO, PSX and PBF also have the capability to process a diverse range of feedstocks.
VLO’s Price Performance, Valuation & Estimates
Shares of Valero have rallied 39.3% over the past year compared with the 15.3% gain of the composite stocks belonging to the industry.
From a valuation standpoint, VLO trades at a trailing 12-month enterprise-value-to-EBITDA (EV/EBITDA) of 9.08X. This is above the composite stocks' average of 4.56X.
The Zacks Consensus Estimate for VLO’s 2025 earnings has remained constant over the past seven days.
Image Source: Zacks Investment Research
Valero currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.