Key Highlights

  • VLO is trading up 1.28% at $438.96 on October 21, with a market capitalization of about $126.39 billion.
  • Third-quarter results are due Thursday, October 22, before the open, with a call at 10:00 a.m. ET.
  • Second-quarter EPS was $12.62 on net income of $3.7 billion, from revenue of $42.8 billion.
  • Third-quarter throughput guidance is about 2.8 million to 2.9 million barrels a day.
  • Trailing EPS is $24.11, the P/E is 18.21 and the dividend yield is 1.09%.

Why Is Valero Energy Edging Higher Before Thursday's Earnings?

Valero Energy (NYSE:VLO) is trading up 1.28% at $438.96 on October 21, the largest gain among refiners in its group. No company announcement was identified for the move, and stronger oil and refining margins are context, not a confirmed cause.

The company reports third-quarter results on Thursday, October 22, before the market opens, with a call at 10:00 a.m. ET. The market is waiting to see whether the exceptional second quarter was a peak or a new baseline.

What Did the Latest Call Set Up for the Third Quarter?

Valero is the largest independent US petroleum refiner and also runs renewable diesel and ethanol operations. In the second quarter it reported net income of $3.7 billion, or $12.62 per share ($12.54 adjusted), on revenue of $42.8 billion, up 52% from a year earlier. Refining operating income was $4.5 billion on throughput of 3.0 million barrels a day, and cash operating costs were $4.70 a barrel.

Renewable diesel earned $717 million, against a loss of $79 million a year earlier, as credit prices rose faster than feedstock costs. Ethanol earned $318 million. Operating cash flow was $5.6 billion, and the company returned $2.6 billion to holders, a 59% payout ratio, with a quarterly dividend of $1.20 per share. Cash stood at $7.9 billion.

For the third quarter, management guided total throughput of about 2.8 million to 2.9 million barrels a day, refining cash costs of about $4.75 a barrel and ethanol production of 4.8 million gallons a day. Year-ago third-quarter EPS was about $3.66.

What Would a Strong or Weak Quarter Look Like for Valero?

Encouraging readings would be throughput within or above the guided range, refining margin capture holding up, continued strength in renewable diesel and ethanol, and sustained cash returns. Management cited crude purchases at discounts to benchmarks, strong naphtha, propylene and sulfur prices, a jet fuel export opening to Europe and a $230 million catalytic cracker project at St. Charles due in the third quarter.

Concerning readings would be lower throughput, margin compression, or signs of the risks flagged on the call: tariff developments, policy uncertainty in renewable diesel, higher carbon-credit costs and the Port Arthur hydrotreater repair, estimated at $250 million and mostly insured, with a return to service expected by year-end. These are readings investors will look for, not predictions.

How Do Trailing Figures and Analyst Targets Frame the Report?

Trailing EPS of $24.11 and growth of 899.64% come off a depressed base and are not a clean guide, so the P/E of 18.21 should be read with care. The consensus analyst rating is Buy. In October, several research firms raised targets, including Goldman Sachs to $496 from $457 and Raymond James to $530 from $450, while DBS moved to Hold with a $436 target. Those are data points on expectations heading into Thursday.