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What to Expect From Valero Energy (VLO) This Earnings Season

Zacks Equity Research

Valero Energy Corporation VLO is set to report second-quarter 2019 results on Jul 25, before the market opens.

The leading independent refining player surpassed the Zacks Consensus Estimate in the last four quarters, with the average being 46.6%.

Valero Energy Corporation Price and EPS Surprise

Valero Energy Corporation Price and EPS Surprise

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

Let’s see how things are shaping up prior to the announcement.

Which Way are Estimates Headed?

Let’s take a look at the estimate revision trend to get a clear picture of what analysts feel about the company prior to the upcoming earnings release.

The Zacks Consensus Estimate for second-quarter earnings of $1.47 has seen one upward revision and eight downward movements in the past 30 days. The figure suggests a year-over-year decline of 31.6%.

Further, the Zacks Consensus Estimate for revenues is pegged at $26.7 billion for the quarter, indicating a decline of 14.1% from the year-ago reported figure.

Factors to Consider

With 15 refineries, Valero has a diversified refinery base with a capacity of 3.1 million barrels per day, making it well positioned to derive profit from increased margins in the to-be-reported quarter. The company created a new segment during the last reported quarter, namely Renewable Diesel, which incorporated the operations of a consolidated joint venture, Diamond Green Diesel.

The Zacks Consensus Estimate for operating income from the ethanol segment for the second quarter is pegged at $32.4 million, down from $43 million reported in the year-ago period due to lower ethanol prices.

The company is expected to report total refining throughput volumes of 2,898 thousand barrels per day, in line with the year-ago level. The Zacks Consensus Estimate for operating income of the refining segment for the June quarter is pegged at $965 million, down from $1,387 million reported in the preceding quarter.

Earnings Whispers

Our proven model does not indicate an earnings beat for Valero Energy. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Earnings ESP: The company’s Earnings ESP is 0.00% as the Most Accurate Estimate and the Zacks Consensus Estimate are both pegged at $1.47. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Valero Energy currently carries a Zacks Rank #3, which increases the predictive power of ESP. But we also need to have a positive Earnings ESP to be confident of a positive surprise.

Meanwhile, Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.   

Stocks That Warrant a Look

Though earnings beat looks uncertain for Valero Energy, here are some firms that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

TransCanada Corporation TRP is set to report second-quarter 2019 earnings on Aug 1. The stock has an Earnings ESP of +0.34% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Royal Dutch Shell plc RDS.A has an Earnings ESP of +0.55% and is a #3 Ranked player. The company is anticipated to release second-quarter 2019 earnings on Aug 1.

Enbridge Inc ENB is set to report second-quarter 2019 earnings on Aug 2. The stock has an Earnings ESP of +8.88% and a Zacks Rank #3.

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