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Valero Energy (VLO) Q3 Earnings Surpass Estimates, Sales Lag

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Valero Energy Corporation (VLO - Free Report) posted adjusted third-quarter 2018 profit of $2.01 per share, which surpassed the Zacks Consensus Estimate of $1.95 and the year-ago figure of $1.91. Higher throughput volumes along with impressive capacity utilization supported the better-than-expected results.

Total revenues grew 30.9% year over year to $30,849 million. The top line, however, missed the Zacks Consensus Estimate of $31,820 million.

Valero Energy Corporation Price, Consensus and EPS Surprise

Valero Energy Corporation Price, Consensus and EPS Surprise | Valero Energy Corporation Quote

Refining Segment

While the company benefited from higher throughput levels, lower margins from gasoline and secondary products reduced the total income from the refining segment to $1.3 billion vis a vis $1.4 billion recorded in the year-ago quarter.

During the quarter, refining throughput volumes were approximately 3.1 million barrels per day, up from 2.9 million in the year-ago quarter. Capacity utilization rate in the reported quarter was 99%, higher than 92% achieved in the corresponding quarter of 2017.

By feedstock composition, sweet crude, medium/light sour crude and heavy sour crude accounted for 54.4%, 15.1% and 16.6%, respectively. The remaining volumes came from blendstocks and others.

Notably, the Gulf Coast accounted for approximately 59.2% of the total throughput volumes. The Mid-Continent, North Atlantic and West Coast regions contributed 14.8%, 16.4% and 9.6%, respectively.

On a negative note, company-wide throughput margins decreased to $10.00 per barrel from the year-ago level of $10.94.

Refining operating expense per barrel was $3.67 compared with $3.75 in the year-ago quarter. Depreciation and amortization expenses per barrel of throughput also decreased 4% year over year to $1.64.

Ethanol Segment

Operating income from the segment came in at $21 million, reflecting a massive decline of 74.4% from the year-ago figure, amid lower ethanol prices. Notably, the figure also lagged the Zacks Consensus Estimate of $44.2 million.

VLP Segment

The midstream segment of the firm generated operating income of $90 million compared with $69 million recorded in the year-ago quarter. Higher contributions from Port Arthur terminal assets and Parkway Pipeline drove the results. The figure also topped the Zacks Consensus Estimate of $88 million.

Capital Expenditure  

Third-quarter capital expenditure was $604 million, including $435 million for turnarounds and catalyst expenditures. For 2018, the company reiterated its capital expenditure of $2.7 billion, in line with the 2017 level. Of this, $1.0 billion will be allocated toward growth projects and $1.7 billion for sustaining the business.

Balance Sheet

At the end of the quarter, the company had cash and temporary cash investments of $3.6 billion, along with debt of $9.1 billion, representing a debt-to-capital ratio of 24%. Valero Energy rewarded its shareholders with dividends and share buybacks worth $775 million.

Zacks Rank & Stocks to Consider

Currently, Valero Energy carries a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space are Murphy Oil Corporation (MUR - Free Report) , Eni SpA (E - Free Report) and Range Resources Corporation (RRC - Free Report) , each sporting  a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Murphy Oil pulled off an average positive earnings surprise of 96.50% in the last four quarters.

Eni delivered an average positive earnings surprise of 492.8% in the trailing four quarters.

Range Resources delivered an average positive earnings surprise of 47.48% in the last four quarters.

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