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Valero Energy (VLO) Up 9.3% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Valero Energy Corporation (VLO - Free Report) . Shares have added about 9.3% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is VLO due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

First-Quarter 2018 Results

Valero Energy posted first-quarter 2018 income of $1.00 per share, beating the Zacks Consensus Estimate of 92 cents. Quarterly earnings improved from the year-ago quarter’s figure of 68 cents.

Total revenues grew 21.4% to $26,439.0 million, from $21,772.0 million in the prior-year quarter. The figure surpassed the Zacks Consensus Estimate of $23,530.0 million.

Valero Energy’s results gained from higher throughput margin owing to 94% throughput capacity utilization.

Q1 Segmental Performance

Gross operating income in the Refining segment increased to $922 million from $640 million in the year-ago quarter, beating the Zacks Consensus Estimate of $783 million. The upside can be attributed to higher throughput margin owing to 94% throughput capacity utilization. Moreover, wider spreads between domestic sweet crude oil and Brent contributed to growth.

Ethanol gross operating income increased to $45 million from $22 million in the year-ago quarter and beat the Zacks Consensus Estimate of $34.86 million. The upside was led by higher distillate margins in most regions.

Gross operating income from the VLP segment was $84 million compared with $70 million in the prior-year quarter and surpassed the Zacks Consensus Estimate of $80 million. The increase was primarily due to new acquisitions made in the end of 2017. The acquired assets, which boosted growth, were the Port Arthur terminal assets and Parkway Pipeline.

Corporate and other segment reported gross expenses of $250 million, up from the year-ago quarter’s level of $192 million. The figure was wider than the Zacks Consensus Estimate of $212 million.

Throughput Volumes

In the quarter under review, refining throughput volumes were approximately 2.9 million barrels per day, up from 2.8 million barrels per day in the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of 2.8 million barrels per day.

By feedstock composition, sweet crude, medium/light sour crude and heavy sour crude accounted for 45.9%, 13.9% and 16.4%, respectively. The remaining volumes came from residuals, other feedstock as well as blendstocks and others.

The Gulf Coast accounted for approximately 59% of the total throughput volume. The Mid-Continent, North Atlantic and West Coast regions accounted for 16%, 16% and 9%, respectively.

Throughput Margins

Refining margin per barrel of throughput increased to $8.36 per barrel from the year-ago quarter’s level of $8.14 per barrel but missed the Zacks Consensus Estimate of $8.8 per barrel.

Refining operating expense per barrel was $3.78 compared with $3.87 in the year-ago quarter. Depreciation and amortization expenses declined year over year to $1.69 a barrel from $1.76.

Capital Expenditure & Balance Sheet

First-quarter capital expenditure totaled $631.0 million, including $448 million for turnarounds and catalyst expenditures. At the end of the completed quarter, the company had cash and temporary cash investments of $4.7 billion and debt of $9 billion. Valero Energy returned shareholders $665 million, of which $320 million was used to repurchase 3.5 million of its common stock and award shareholders with dividends worth $345 million.

For 2018, the company expects capital expenditures of $2.7 billion, which is in line with 2017 levels.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter.

VGM Scores

At this time, VLO has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for value based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, VLO has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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