U.S. markets close in 1 hour 58 minutes

Valero (VLO) Gears Up for Q1 Earnings: What's in the Cards?

Zacks Equity Research

Valero Energy Corporation VLO is set to report first-quarter 2020 results on Apr 29, before the market opens.

In the last reported quarter, the company came up with earnings of $2.13 per share that surpassed the Zacks Consensus Estimate of $1.60, backed by lower cost of sales and processing of a record number of Canadian low-cost heavy crude. Higher ethanol prices also supported the results.

The leading independent refining player surpassed the Zacks Consensus Estimate in each of the last four quarters, with the average being 30.8%, as shown in the chart below.

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 have shaped up prior to the announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for first-quarter earnings of 8 cents has seen no upward movement but six downward revisions in the past 30 days. The figure suggests a year-over-year decline of 76.5% from earnings of 34 cents per share.

The company expects revenues for the March quarter in the band of $20,100-$22,200 million, indicating a decline from the year-ago level of $24,263 million.

Factors to Consider

As refining contributes the most among all operating segments of Valero, which is one of the largest refiners in North America, weak demand for refined petroleum products due to coronavirus-induced lockdowns is likely to have lowered total throughput volumes and hurt first-quarter profit.  

The Zacks Consensus Estimate for total refining throughput volumes is pegged at 2,751 thousand barrels per day, indicating a decline from the year-ago quarter’s 2,865 thousand barrels. The potential decline might have affected the company’s first-quarter earnings.

The Zacks Consensus Estimate for first-quarter operating loss from the Ethanol segment is pegged at $55 million. Operating profit of $3 million was recorded in the year-ago period. Notably, the company expects total cost of sales in the range of $22,700-$24,300 million. The metric in the year-ago period was $23,730 million.

However, the Zacks Consensus Estimate for first-quarter operating profit from the Renewable Diesel segment is pegged at $104 million, implying an improvement from $49 million recorded in the year-ago period. This potential increase is likely to have partially offset the negatives.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Valero this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases chances of an earnings beat. That is not the case here as you will see below.

Earnings ESP: The company’s Earnings ESP is -266.13% as the Most Accurate Estimate is currently pegged at a loss of 13 cents per share, while the Zacks Consensus Estimate stands at earnings of 8 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Valero currently carries a Zacks Rank #3.

Stocks That Warrant a Look

While earnings beat looks uncertain for Valero, here are some companies from the Energy space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

Southwestern Energy Company SWN has an Earnings ESP of +20.51% and is a Zacks #2 Ranked player. The company is scheduled to release first-quarter results after the market closes on Apr 30. You can see the complete list of today’s Zacks #1 Rank stocks here.

Enbridge Inc. ENB has an Earnings ESP of +2.57% and a Zacks Rank of 3. It is scheduled to report first-quarter results on May 7.

DCP Midstream Partners, LP DCP has an Earnings ESP of +2.99% and holds a Zacks Rank #3. It is set to report first-quarter results on May 6.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>


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
 
Southwestern Energy Company (SWN) : Free Stock Analysis Report
 
Enbridge Inc (ENB) : Free Stock Analysis Report
 
DCP Midstream Partners, LP (DCP) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research