Here's Why Valero (VLO) is an Attractive Investment Bet Now
Valero Energy Corporation VLO has seen upward earnings estimate revisions for 2023 and 2024 in the past 30 days.
The company, with a Zacks Rank #1 (Strong Buy), has gained 55% in the past year, surpassing the industry’s 18.8% growth.
Image Source: Zacks Investment Research
What’s Favoring the Stock?
Valero is one of the leading oil refiners. The company’s refineries are located across the United States, Canada and the U.K. Valero, which has ownership interests in 15 petroleum refineries, has a combined throughput capacity of 3.2 million barrels per day.
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, which would allow it to return capital to shareholders and back growth projects.
Valero’s renewable diesel segment involves the Diamond Green Diesel (“DGD”) joint venture, which is a leading renewable fuel producer in North America. The joint venture is between Darling Ingredients Inc. and Valero. Low-carbon fuel policies across the globe are primarily aiding the demand for renewable diesel, driving Valero’s Renewable Diesel business.
With the commissioning of the DGD Port Arthur facility in the fourth quarter of 2022, DGD’s combined renewable diesel production capacity increased by 470 million gallons per year to approximately 1.2 billion gallons per year. In 2023, Valero’s renewable diesel margins are expected to remain consistent with the current levels.
In 2022, Valero’s total throughput volumes increased to 2,953 thousand barrels per day from 2,787 thousand barrels per day. The majority of Valero’s refining plants are located in the Gulf coast area from where there is easy access to the export facilities. This Gulf coast presence helped Valero expand its export volumes over the last few years and gain from high distillate margins.
Valero’s commitment to the energy transition is commendable. The company is on track to reduce and displace Refinery GHG emissions by 63% through investments in board-approved projects by 2025. Hence, Valero is actively investing in low-carbon businesses such as biofuels, renewable diesel and wind power generation.
Other Key Picks
Investors interested in the energy sector might look at the following companies that presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Antero Midstream Corporation AM reported fourth-quarter 2022 adjusted earnings per share of 20 cents, beating the Zacks Consensus Estimate of 17 cents. The strong quarterly results were primarily driven by higher freshwater delivery volumes and increased average freshwater distribution fees.
For 2023, Antero Midstream expects a net income of $340-$380 million, indicating an increase from $326.2 million reported in 2022.
Marathon Petroleum Corporation’s MPC adjusted earnings per share of $6.65 comfortably beat the Zacks Consensus Estimate of $5.54. The bottom line was favorably impacted by the stronger-than-expected performance of its key Refining & Marketing segment.
In the fourth quarter, MPC repurchased $1.8 billion of shares and another $700 million worth of shares from the start of this year to Jan 27. Marathon Petroleum, which gave an additional $5 billion share repurchase approval, currently has a remaining authorization of $7.6 billion.
Murphy USA Inc.’s MUSA fourth-quarter 2022 earnings per share of $5.21 missed the Zacks Consensus Estimate of $6.16. The underperformance can be attributed to lower-than-expected petroleum product sales.
Murphy USA projects a 2023 fuel volume of 240-245 thousand gallons on an APSM basis. Further, Murphy USA’s 2023 guidance includes up to 45 new stores, up to 30 raze-and-rebuilds, and $795-$815 million in merchandise margin contribution.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Valero Energy Corporation (VLO) : Free Stock Analysis Report
Antero Midstream Corporation (AM) : Free Stock Analysis Report
Murphy USA Inc. (MUSA) : Free Stock Analysis Report
Marathon Petroleum Corporation (MPC) : Free Stock Analysis Report
