Fan News: "Home retail analyst Valero Number Fan predicted today that Valero will end January with a stock price of $58-$59 per share. Fan states that highly compensated Wall Street analyst have predicted too low of fourth quarter earnings estimates. Fan goes on to state that they do not fully appreciate the heavy sour crude discounts that Valero experienced in the fourth quarter and that too many analyst just follow the sweet crude Brent to WTI discounts.
Also, Fan states that analyst are not factoring in the bonanza of a quarter that Valero has had in ethanol profits. In addition, Valero took in nearly a billion in cash from its early creation of an MLP and the sale of its CST stock. Fan thinks that Valero will announce a dividend increase in the next two weeks that will help propel the stock followed by a blow out later in the month of fourth quarter earnings estimates."
All rights reserved. Copyright January 3, 2014. Vaper Publications, Inc. Delaware, MD.
Breaking News: April 25, 2014 Valero Stock Price Prediction
Fan News: "Home retail analyst Valero Number Fan announced today a new price target for Valero of $72 per share. Fan states that while highly compensated Wall Street analysts such as B of A and B of A/Merrill Lynch and several others are downgrading Valero, Fan thinks the total opposite". Fan states that they do not fully appreciate the huge build in crude inventories in the Gulf Coast and the resulting pricing pressure of medium and heavy crudes that Valero processes.
Fan notes the $72 price target would be 2X book value would be much lower than the S&P 500 average and still lower than peers such as MPC and PSX.
Fan also states, analyst do not appreciate the fact that WTI discount is up to $9 a barrel and will soon escalate as the very huge bullish bets on WTI crude oil prices start to unwind.
Also, Fan states that analyst are not factoring the excellent margins of gasoline and diesel that Valero and other Gulf Coast refiners are experiencing. So far in the second quarter, Valero is earning a very profitable $23.44 per barrel in its Gulf Coast system.
Fan further notes that the export market is very strong and the US exported a record of 4.5 million of refined products a day in December.
Fan also apologizes for his last call of Valero hitting $58 by end of January instead of hitting it about 3 months later.
All rights reserved. Copyright April 25, 2014. Vaper Publications, Inc. Delaware, MD.
So how did the Fan do? Well on the face of it, you would say not good. On the face of it, Fan was off about $7 per share ($58 prediction-$51 closing price end of January)
But let's see... in January we had the worst percentage drop in Dow in 1 year and 9 months of 5.3% and the S&P of 3.6%.The Philadelphia energy index was off 6%.
Valero has a Beta of 1.5x. So, Valero should have dropped either 1.5X of 5.3% (Dow loss) or 1.5x of 3.5%(S&P loss). So, Valero should have lost $8 in value in January or $5.25 in Value in January. Valero was actually up 2.5% for the month or a swing of $10.50 or $7.75 or how it should of performed.
So, factoring in a negative $10.50 or negative $7.75, then Fan outperformed his prediction by either $3.50 or 75 cents depending upon which market index you use.
Also, it did not help that the timing of the preannouncement of Valero's excellent 4th quarter earnings was the night before the stock market has a big correction.
Lock and load.
Narrowing Brent/WTI differential in Q1 due to Keystone South opening that pressured share price today may mute rally tomorrow. $58-$59 may be a stretch unless VLO can beat updated guidance, which is nigh impossible at this late date.
Current relevant exit doors are:
1) $48 ( successfully got thru it once)
2) $52 ( this is a small door- no issue)
3) $58 ( this is a very wide door )
Lots of unhappy LT share holders are waiting there.
We got thru $48 once..... But doors work both ways for a awhile.... Need to successfully get to the next door.
$48 or $56 next is the question. If we revisit $48 , we could go back to the last door at $42.
Current odds..... We will not see $47 in January.
Woke up to 12 degrees ..... And by next week we will see zero.
VLO will pop.
Pretty good Fan.....and you can add " VLO management predicts a record setting Q1 due to the record cold in the Midwest and East Coast in January .Distillate cracks blew out in the second week of January resulting in $20 margins.."
Thanks AH. Like your addition to the press release. On all future editions, this will appear. (but you and I know that even if that is the case, Klesse will say something like, yes we predict a record quarter, but we don't know how long these margins will last or that these are unsustainable or he will simply say "diesel margins are good right now").