We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Why Is Valero Energy (VLO) Up 6% Since Last Earnings Report?
Read MoreHide Full Article
A month has gone by since the last earnings report for Valero Energy (VLO - Free Report) . Shares have added about 6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Valero Energy due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Valero Beats Q1 Earnings on Renewable Diesel Sales Volumes
Valero Energy Corporation reported first-quarter 2020 earnings of 34 cents per share against the Zacks Consensus Estimate of a loss of 15 cents. However, quarterly earnings decreased from the year-ago earnings of 43 cents per share.
Total revenues fell from $24,263 million in the prior-year period to $22,102 million in the quarter under review. However, the top line surpassed the Zacks Consensus Estimate of $21,617 million.
The better-than-expected results can be attributed to a rise in renewable diesel sales volumes and lower operating expenses. This was partially offset by lower ethanol prices and refining margin, as well as increased corn prices.
In first-quarter 2020, the company completed the Pasadena terminal project, which will likely expand the product logistics portfolio, enhance capacity for biofuels blending and boost export flexibility.
Segmental Performance
Operating loss from the Refining segment was reported at $2,087 million against operating income of $479 million in the year-ago quarter. The Zacks Consensus Estimate for the same was pegged at a profit of $813 million. Refining throughput volumes marginally declined from first-quarter 2019.
In the Ethanol segment, the company reported operating loss of $197 million against a profit of $3 million in the year-ago quarter. Moreover, the reported figure was wider than the Zacks Consensus Estimate of a loss of $55 million. The downside was caused by lower ethanol prices and increased corn prices. Ethanol production volumes in the quarter were reported at 4.1 million gallons per day.
Valero created a new segment in first-quarter 2019, namely Renewable Diesel, which incorporated the operations of a consolidated joint venture, Diamond Green Diesel. Operating income from the segment was $198 million compared with $49 million in the year-ago period. The figure surpassed the Zacks Consensus Estimate of $104 million. The increase was attributed to a rise in renewable diesel sales volumes.
Expenses & Operating Income
General and administrative expenses in the Corporate and other segment totaled $177 million compared with the prior-year level of $209 million. Operating expenses fell to $1,124 million from the year-ago figure of $1,215 million. Total cost of sales rose to $24,187 million in the quarter from the year-ago period’s $23,730 million.
Quarterly operating loss in the quarter was $2,277 million against operating income of $308 million in the year-ago period.
Throughput Volumes
During the quarter, refining throughput volumes were 2,824 thousand barrels per day (Mbpd), marginally down from the prior-year quarter’s 2,865 Mbpd.
In terms of feedstock composition, sweet crude, medium/light sour crude and heavy sour crude accounted for 54.5%, 8.9% and 12.8%, respectively, of its total volume. The remaining volumes came from residuals, other feedstock blendstocks and others.
The Gulf Coast contributed approximately 59.1% to total throughput volume. Mid-Continent, North Atlantic and West Coast regions accounted for 15.3%, 17.2% and 8.4%, respectively, of the total throughput volume.
Throughput Margins
Refining margin per barrel of throughput decreased to $7.24 from the year-ago level of $8.00. Refining operating expense per barrel was $3.87 compared with $4.15 in the year-ago quarter. Depreciation and amortization expenses increased to $2.09 a barrel from $1.96 in the prior-year quarter. As such, adjusted refining operating income was recorded at $1.28 per barrel of throughput, lower than the year-ago level of $1.89.
Share Repurchase
Valero returned $548 million to shareholders, of which $147 million was used to repurchase 2.1 million shares of common stock and $401 million was paid as dividends to shareholders.
Capital Expenditure & Balance Sheet
First-quarter capital expenditure totaled $705 million, of which $468 million was allotted for sustaining the business.
At the end of the quarter, the company had cash and cash equivalents of $1.5 billion, reflecting a decline from the fourth-quarter 2019 level of $2.6 billion. As of Mar 31, 2020, it had a total debt of $11.5 billion, depicting a rise from $9.7 billion in fourth-quarter 2019. Its debt-to-capitalization was 34%. The company entered into a revolving credit facility worth $875 million on Apr 13.
Outlook
Valero expects capital expenditure for 2020 to be $2.1 billion, which is $400 million lower than the original guidance. The St. Charles alkylation unit is expected to come online in 2020. Moreover, the company’s Diamond Green Diesel expansion project and Diamond Pipeline expansion are scheduled to be completed in 2021.
The current market uncertainty caused by coronavirus-induced lockdowns and travel bans has reduced demand for the company’s products like gasoline and jet fuel. Weak energy demand environment affected the company’s first-quarter results and will continue to do so until the economies go into a recovery mode.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted 17.1% due to these changes.
VGM Scores
At this time, Valero Energy has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.
Outlook
Valero Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Why Is Valero Energy (VLO) Up 6% Since Last Earnings Report?
A month has gone by since the last earnings report for Valero Energy (VLO - Free Report) . Shares have added about 6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Valero Energy due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Valero Beats Q1 Earnings on Renewable Diesel Sales Volumes
Valero Energy Corporation reported first-quarter 2020 earnings of 34 cents per share against the Zacks Consensus Estimate of a loss of 15 cents. However, quarterly earnings decreased from the year-ago earnings of 43 cents per share.
Total revenues fell from $24,263 million in the prior-year period to $22,102 million in the quarter under review. However, the top line surpassed the Zacks Consensus Estimate of $21,617 million.
The better-than-expected results can be attributed to a rise in renewable diesel sales volumes and lower operating expenses. This was partially offset by lower ethanol prices and refining margin, as well as increased corn prices.
In first-quarter 2020, the company completed the Pasadena terminal project, which will likely expand the product logistics portfolio, enhance capacity for biofuels blending and boost export flexibility.
Segmental Performance
Operating loss from the Refining segment was reported at $2,087 million against operating income of $479 million in the year-ago quarter. The Zacks Consensus Estimate for the same was pegged at a profit of $813 million. Refining throughput volumes marginally declined from first-quarter 2019.
In the Ethanol segment, the company reported operating loss of $197 million against a profit of $3 million in the year-ago quarter. Moreover, the reported figure was wider than the Zacks Consensus Estimate of a loss of $55 million. The downside was caused by lower ethanol prices and increased corn prices. Ethanol production volumes in the quarter were reported at 4.1 million gallons per day.
Valero created a new segment in first-quarter 2019, namely Renewable Diesel, which incorporated the operations of a consolidated joint venture, Diamond Green Diesel. Operating income from the segment was $198 million compared with $49 million in the year-ago period. The figure surpassed the Zacks Consensus Estimate of $104 million. The increase was attributed to a rise in renewable diesel sales volumes.
Expenses & Operating Income
General and administrative expenses in the Corporate and other segment totaled $177 million compared with the prior-year level of $209 million. Operating expenses fell to $1,124 million from the year-ago figure of $1,215 million. Total cost of sales rose to $24,187 million in the quarter from the year-ago period’s $23,730 million.
Quarterly operating loss in the quarter was $2,277 million against operating income of $308 million in the year-ago period.
Throughput Volumes
During the quarter, refining throughput volumes were 2,824 thousand barrels per day (Mbpd), marginally down from the prior-year quarter’s 2,865 Mbpd.
In terms of feedstock composition, sweet crude, medium/light sour crude and heavy sour crude accounted for 54.5%, 8.9% and 12.8%, respectively, of its total volume. The remaining volumes came from residuals, other feedstock blendstocks and others.
The Gulf Coast contributed approximately 59.1% to total throughput volume. Mid-Continent, North Atlantic and West Coast regions accounted for 15.3%, 17.2% and 8.4%, respectively, of the total throughput volume.
Throughput Margins
Refining margin per barrel of throughput decreased to $7.24 from the year-ago level of $8.00. Refining operating expense per barrel was $3.87 compared with $4.15 in the year-ago quarter. Depreciation and amortization expenses increased to $2.09 a barrel from $1.96 in the prior-year quarter. As such, adjusted refining operating income was recorded at $1.28 per barrel of throughput, lower than the year-ago level of $1.89.
Share Repurchase
Valero returned $548 million to shareholders, of which $147 million was used to repurchase 2.1 million shares of common stock and $401 million was paid as dividends to shareholders.
Capital Expenditure & Balance Sheet
First-quarter capital expenditure totaled $705 million, of which $468 million was allotted for sustaining the business.
At the end of the quarter, the company had cash and cash equivalents of $1.5 billion, reflecting a decline from the fourth-quarter 2019 level of $2.6 billion. As of Mar 31, 2020, it had a total debt of $11.5 billion, depicting a rise from $9.7 billion in fourth-quarter 2019. Its debt-to-capitalization was 34%. The company entered into a revolving credit facility worth $875 million on Apr 13.
Outlook
Valero expects capital expenditure for 2020 to be $2.1 billion, which is $400 million lower than the original guidance. The St. Charles alkylation unit is expected to come online in 2020. Moreover, the company’s Diamond Green Diesel expansion project and Diamond Pipeline expansion are scheduled to be completed in 2021.
The current market uncertainty caused by coronavirus-induced lockdowns and travel bans has reduced demand for the company’s products like gasoline and jet fuel. Weak energy demand environment affected the company’s first-quarter results and will continue to do so until the economies go into a recovery mode.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted 17.1% due to these changes.
VGM Scores
At this time, Valero Energy has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.
Outlook
Valero Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.