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Valero Energy (VLO) Beats Q3 Earnings and Revenue Estimates

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Valero Energy Corporation (VLO - Free Report) posted third-quarter 2019 income of $1.48 per share, beating the Zacks Consensus Estimate of $1.35. However, quarterly earnings decreased from the year-ago figure of $2.01 per share.

Total revenues fell from $30,849 million in the prior-year period to $27,249 million in the quarter under review. However, the top line surpassed the Zacks Consensus Estimate of $24,594 million.

The better-than-expected results can be attributed to lower total cost of sales and the Diamond Green Diesel plant expansion. However, this was partially offset by narrower crude oil discounts, relative to the Brent Crude benchmark, and higher corn prices.

The company spent $525 million on Central Texas pipelines and terminals, which were completed in the reported quarter.

Valero Energy Corporation Price, Consensus and EPS Surprise

Valero Energy Corporation Price, Consensus and EPS Surprise

Valero Energy Corporation price-consensus-eps-surprise-chart | Valero Energy Corporation Quote

Segmental Performance

Operating income from the Refining segment plunged to $1,087 million from $1,424 million in the year-ago quarter. Also, the figure missed the Zacks Consensus Estimate of $1,150 million. The segment was affected by narrower crude oil discounts, relative to the Brent Crude benchmark. Notably, the company processed 190,000 barrels per day of Canadian heavy crude oil during the reported quarter.

In the Ethanol segment, the company reported operating loss of $43 million against profit of $21 million in the year-ago quarter. Moreover, the reported figure missed the Zacks Consensus Estimate of a loss of $15.9 million. The downside was caused by higher corn prices.

Valero created a new segment during the first quarter, namely Renewable Diesel, which incorporated the operations of a consolidated joint venture, Diamond Green Diesel. Gross operating income from the segment was $65 million against operating loss of $5 million in the year-ago period. The increase was attributed to the expansion of the Diamond Green Diesel plant, which had occurred in third-quarter 2018. However, the figure lagged the Zacks Consensus Estimate of $73 million.

General and administrative expenses in the Corporate and other segment totaled $217 million compared with the prior-year level of $209 million. Total cost of sales fell to $26,130 million in the quarter from the year-ago period’s $29,398 million.

Throughput Volumes

During the quarter, refining throughput volumes were approximately 2,954 thousand barrels per day (MBPD), down from the prior-year quarter’s 3,100 MBPD. Refinery throughput capacity utilization in the reported quarter was 94%.

In terms of feedstock composition, sweet crude, medium/light sour crude and heavy sour crude accounted for 54.7%, 8.6% and 14.2%, respectively, of its total volume. The remaining volumes came from residuals, other feedstock blendstocks and others. The Gulf Coast contributed approximately 60.2% to total throughput volume. Mid-Continent, North Atlantic and West Coast regions accounted for 15.2%, 16.1% and 9.6%, respectively.

Throughput Margins

Refining margin per barrel of throughput decreased to $9.99 from the year-ago level of $10.42. Refining operating expense per barrel was $4.05 compared with $3.72 in the year-ago quarter. Depreciation and amortization expenses increased to $1.90 a barrel from $1.68 in the prior-year quarter.

Share Repurchase

Valero returned $679 million to its shareholders, of which $3.7 million was used to repurchase around 3.9 million shares of its common stock and $372 million was paid as dividends to its shareholders.

Capital Expenditure & Balance Sheet

Third-quarter capital expenditure totaled $525 million, of which $305 million was allotted for sustaining the business.

At the end of the quarter, the company had cash and cash equivalents of $2.1 billion, and a debt of $9.6 billion. Its debt-to-capitalization ratio was 26%.

Outlook

Valero reiterated its capital expenditure view for 2019 and 2020 to be $2.5 billion each. Around 40% of the budget will be used for growth projects. The Pasadena terminal, and St. Charles alkylation and Pembroke cogeneration units are expected to come online in 2020. Moreover, the company’s Diamond Green Diesel expansion and Port Arthur Coker projects are scheduled to be completed in 2021 and 2022, respectively.

Zacks Rank and Stocks to Consider

Currently, Valero has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Matrix Service Company (MTRX - Free Report) , Exterran Corporation (EXTN - Free Report) and Pembina Pipeline Corp. (PBA - Free Report) . While Matrix Service sports a Zacks Rank #1 (Strong Buy), Exterran and Pembina hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Matrix Service’s 2019 earnings per share are expected to rise 58.4% year over year.

Exterran’s 2019 top line is expected to rise around 5% year over year.

Pembina’s 2019 earnings per share are expected to rise 21.5% year over year.

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