Here's Why it is Worth Buying Valero (VLO) Stock Right Away
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 #2 (Buy), has gained 30.7% in the past year, surpassing the industry’s 12.2% 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, with 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 will 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 1.2 billion gallons per year. In 2023, Valero’s renewable diesel margins are expected to be consistent with the current levels.
Valero’s board of directors approved an increase in the regular quarterly cash dividend from 98 cents per share to $1.02. The dividend hike raises the company’s annualized cash dividend rate to $4.08 per share.
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 also presently carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cactus, Inc. WHD reported fourth-quarter adjusted earnings of 57 cents per share, beating the Zacks Consensus Estimate of 51 cents. Strong quarterly earnings were primarily driven by increased drilling activity by customers, offset partially by higher total expenses.
At the fourth-quarter end, Cactus had cash and cash equivalents of $344.5 million, which can provide it with immense financial flexibility. Cactus had no bank debt outstanding as of Dec 31, 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 till Jan 27. Marathon Petroleum, which gave an additional $5 billion share repurchase approval, currently has a remaining authorization of $7.6 billion.
Phillips 66 PSX reported fourth-quarter 2022 adjusted earnings of $4 per share, missing the Zacks Consensus Estimate of $4.34. Lower-than-expected quarterly earnings were driven by lower contributions from the Chemicals segment. The negatives were partially offset by strong refining margins worldwide.
Phillips 66 received approval from the board of directors to hike its dividend. The new quarterly dividend of $1.05 per share reflects an increase of 8.2% from the previous quarter’s 97 cents and a 14% hike from the year-ago quarter’s 92 cents.
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
Marathon Petroleum Corporation (MPC) : Free Stock Analysis Report
Phillips 66 (PSX) : Free Stock Analysis Report
Cactus, Inc. (WHD) : Free Stock Analysis Report
