Here's Why Hold Strategy is Apt for Valero (VLO) Stock Now
Valero Energy Corporation VLO has gained 4.4% in the past six months against a decline of 3.8% of the composite stocks belonging to the energysector.
What’s Favoring the Stock?
Valero, currently carrying a Zacks Rank #3 (Hold), is a best-in-class oil refiner involved in producing fuels and products that can meet the demands of modern life. Its refineries are located across the United States, Canada and the U.K. A total of 15 petroleum refineries, wherein Valero has ownership interests, have a combined throughput capacity of 3.2 million barrels per day.
The Renewable Diesel business segment of the firm comprises Diamond Green Diesel (“DGD”) — a joint venture between Darling Ingredients Inc. and Valero. DGD is a leading renewable fuel producer in North America. Low-carbon fuel policies across the globe primarily are aiding the demand for renewable diesel, therefore driving Valero’s Renewable Diesel business unit.
Valero boasts that its premium refining operations are resilient, even when the business operating environment is carbon-constrained. Its refining business has the capabilities to generate handsome cashflows that will allow it to return capital to shareholders and back growth projects.
Risks
However, being a premium refiner, the firm’s input costs are highly fluctuating, given the volatile pricing scenario of crude oil.
Stocks to Consider
Better-ranked energy companies include Sunoco LP SUN, Enbridge Inc. ENB and Western Midstream Partners, LP WES. While Sunoco LP sports a Zacks Rank #1 (Strong Buy), Enbridge and Western Midstream Partners carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Sunoco, the leading independent fuel distributor in the United States, has a stable business model and has relatively lower exposure to commodity price volatility. This is because the partnership distributes fuel to branded distributors under long-term contracts.
Enbridge generates stable fee-based revenues from its natural gas transmission network. Thus, the midstream energy player connects key markets with the prolific supply basins.
Western Midstream Partners has a stable business model, banking on its midstream assets. With new productions coming online and activities in the Delaware Basin intensifying, there is a notable uptick in total throughput for natural gas, crude oil and natural gas liquids.
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Valero Energy Corporation (VLO) : Free Stock Analysis Report
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Western Midstream Partners, LP (WES) : Free Stock Analysis Report
