Valero Energy Corporation (VLO), with a market cap of $49.4 billion, is a leading independent refiner and ethanol producer in the energy sector. The San Antonio, Texas-based company produces and sells petroleum-based and low-carbon fuels across the United States, Canada, and internationally.
Shares of this refining giant have underperformed the broader market over the past 52 weeks. VLO has gained 12.8% over this time frame, while the broader S&P 500 Index ($SPX) has rallied 19.6%. But, in 2024, VLO has rebounded with a 16.2% YTD return, surpassing SPX's 12% gain.
Narrowing the focus, VLO stock has outpaced the US Oil & Gas Explor & Prod iShares ETF's (IEO) 2.6% decline over the past 52 weeks and a 2% increase on a YTD basis.
Valero Energy has underperformed over the past year relative to the SPX, primarily due to declining gasoline demand driven by the rise of electric vehicles and reduced heating oil needs from warmer winters. In addition, increased competition from refineries in Asia and Latin America has pressured margins and contributed to its lagging performance.
However, the stock surged 5.5% on Jul. 25 primarily due to exceeding Wall Street's Q2 earnings expectations, driven by strong processing volumes despite weaker refining margins. Plus, the company announced plans to operate its refineries at 92% capacity in Q3, with strong performance in its Gulf Coast refineries and progress on its renewable diesel project, further boosting investor confidence.
For the current fiscal year, ending in December, analysts expect VLO's EPS to decline 47.6% year over year to $13.06. The company's earnings surprise history is promising. It beat the consensus estimates in all of the last four quarters.
Among the 17 analysts covering the stock, the consensus rating is a “Strong Buy.” That’s based on 14 “Strong Buy” ratings, two “Holds,” and one “Strong Sell.”
This configuration is more bullish than three months before, with 12 analysts suggesting a "Strong Buy."
On Jul. 29, Jefferies adjusted its price target on Valero Energy to $189, while maintaining its "Buy" rating on the stock. This new target suggests a potential upside of nearly 25.1% from current levels.
The mean price target of $171.47 represents a premium of 13.5% to VLO's current levels. The Street-high price target of $197 suggests that the stock could rally as much as 30.4% from here.
On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
