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Valero (VLO) Gears Up for Q3 Earnings: What's in the Cards?

Zacks Equity Research

Valero Energy Corporation VLO is set to report third-quarter 2019 results on Oct 24, before the market opens.

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 third-quarter earnings of $1.36 has seen no upward revision and seven downward movements in the past 30 days. The figure suggests a year-over-year decline of 32.3%.

Further, the Zacks Consensus Estimate for revenues is pegged at $24.6 billion for the quarter, indicating a decline of 20.3% from the year-ago reported figure.

Factors to Consider

Slowdown in U.S. economic growth has likely hurt demand for refined petroleum products in the September quarter of 2019.  The GDPNow model of Atlanta Federal Reserve estimates third-quarter GDP growth of 1.8%. This reflects a decline from the final figure of 2% in the second quarter.

Being one of the largest refiners in North America, with refining contributing the most among all operating segments, weak refined petroleum products demand is likely to have hurt the company’s third-quarter profit and lowered total throughput volumes.  

Notably, the Zacks Consensus Estimate for third-quarter operating income from the refining segment is pegged at $1,150 million, down 13.5% from $1,329 million in the year-ago period. Moreover, the company is expected to have witnessed total refining throughput volumes of 2,952 thousand barrels per day (B/D), down from the year-ago quarter’s 3,100 thousand B/D.

Earnings Whispers

Our proven model does not indicate an earnings beat for Valero Energy. 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 -0.42% as the Most Accurate Estimate stands at $1.35 per share and the Zacks Consensus Estimate is pegged higher at $1.36. 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.

Highlights of Q2 Earnings & Earnings History

In the last reported quarter, Valero Energy delivered earnings of $1.51 per share that surpassed the Zacks Consensus Estimate of $1.37. However, quarterly earnings declined from the year-ago figure of $2.15.

Notably, the leading independent refining player has surpassed the Zacks Consensus Estimate in each of the last four quarters, the average positive earnings surprise being 47.3%, as shown in the chart below.

Valero Energy Corporation Price and EPS Surprise

Valero Energy Corporation Price and EPS Surprise
Valero Energy Corporation Price and EPS Surprise

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

Stocks That Warrant a Look

Though an 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:

The Williams Companies, Inc. WMB has an Earnings ESP of +1.63% and a Zacks Rank of 3. The energy infrastructure provider is scheduled to release earnings on Oct 30, after the closing bell. You can see the complete list of today’s Zacks #1 Rank stocks here

Patterson-UTI Energy, Inc. PTEN has an Earnings ESP of +0.38% and is Zacks #3 Ranked. The oilfield service provider is set to release earnings on Oct 24.

National Oilwell Varco, Inc. NOV has an Earnings ESP of +16.00% and is a #3 Ranked stock. This manufacturer and designer of equipment used in onshore and offshore oil and gas drilling is scheduled to release earnings on Oct 28, after the closing bell.

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