Valero Energy (VLO) Up 16.3% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Valero Energy (VLO). Shares have added about 16.3% 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 drivers.

Valero Beats Q1 Earnings & Revenues Estimates

Valero reported first-quarter 2022 adjusted earnings of $2.31 per share, improving from a loss of $1.73 in the year-ago quarter. The bottom line also beat the Zacks Consensus Estimate of $1.61 per share.

Total quarterly revenues increased from $20,806 million in the prior-year quarter to $38,542 million. The top line also surpassed the Zacks Consensus Estimate of $32,055 million.

The strong quarterly results have been driven by increased refinery throughput volumes and a higher refining margin.

Segmental Performance

Adjusted operating income in the Refining segment amounted to $1,469 million, turning around from a loss of $506 million in the year-ago quarter. Higher refinery throughput volumes aided the segment.

In the Ethanol segment, Valero reported an adjusted operating profit of $2 million, turning around from a loss of $56 million in the year-ago quarter. Higher ethanol production volumes aided the segment. Production increased to 4,045 thousand gallons per day from 3,562 thousand gallons a year ago.

Operating income at the Renewable Diesel segment declined to $149 million from $203 million in the year-ago quarter. Yet, renewable diesel sales volumes increased to 1,738 thousand gallons per day from 867 thousand gallons a year ago.

Throughput Volumes

For the quarter, Valero’s refining throughput volumes were 2,800 thousand barrels per day (MBbls/d), up from 2,410 MBbls/d in first-quarter 2021.

In terms of feedstock composition, sweet crude, medium/light sour crude, and heavy sour crude accounted for 50.8%, 13.3%, and 11.6%, respectively, of the total volume. The remaining volumes came from residuals, other feedstock, and blendstocks and others.

The Gulf Coast contributed 60.5% to the total throughput volume. Mid-Continent, North Atlantic, and West Coast regions accounted for 15%, 17.3% and 7.2%, respectively, of the total throughput volume.

Throughput Margins

The refining margin per barrel of throughput increased to $12.74 from the year-ago level of $6.91. Refining operating expenses per barrel of throughput was $4.73 compared with $6.78 in the year-ago quarter. Depreciation and amortization expenses declined to $2.18 a barrel from $2.46 in the prior-year quarter. As such, Valero’s adjusted refining operating income was recorded at $5.83 per barrel of throughput against the year-ago loss of $2.33.

Cost of Sales

Valero’s total cost of sales surged to $36,923 million in the first quarter from the year-ago figure of $21,214 million primarily due to the higher cost of materials.

Capital Investment & Balance Sheet

The first-quarter capital investment was $843 million. Of the total amount, $536 million was allotted for sustaining the business. Through the March-end quarter, the leading independent refiner and marketer of petroleum products returned $545 million to stockholders as dividend payments.

At the first-quarter end, Valero had cash and cash equivalents of $2,638 million. As of Mar 31, 2022, it had total debt and finance lease obligations of $13,161 million.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

The consensus estimate has shifted 51.05% due to these changes.

VGM Scores

Currently, Valero Energy has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Valero Energy has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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