Valero's 3Q17 Earnings: Can You Expect an Outstanding Show?

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Part 3
Valero's 3Q17 Earnings: Can You Expect an Outstanding Show? PART 3 OF 7

Valero’s Stock Performance ahead of 3Q17 Earnings

Valero’s positive returns

Since July 3, Valero Energy (VLO) stock has risen 14.5%. Its peers have risen similarly in this period. Let’s look at what led to the rise in Valero stock.

Valero’s Stock Performance ahead of 3Q17 Earnings

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The rise in Valero stock is likely because of Hurricane Harvey, which hit Texas on August 26. The Hurricane affected about 30% of refining capacity in the United Staes. As a result, refining cracks in the industry rose. Also, in the same period, Valero’s refining margin indicators rose across operating regions quarter-over-quarter as well as year-over-year. Plus, the EIA1 recorded a fall of 8.4 million barrels in gasoline inventories for the week ending September 8—the most significant weekly fall in gasoline inventories in the past 27 years. Also, earlier in the stated period, VLO posted its 2Q17 earnings, which beat analysts’ estimates.

However, Hurricane Harvey also affected Valero’s five refineries in the US Gulf Coast region. Per media reports, Valero’s Port Arthur, Corpus Christi, and Three Rivers refineries shut down due to the hurricane. VLO’s Houston and Texas City refineries didn’t shut down but operated at reduced levels. The five refineries have a combined capacity of 1.4 million barrels per day, representing 44% of VLO’s total throughput capacity, which could affect VLO’s refining volumes in its upcoming 3Q17 results.

Overall, Valero’s stock rose—likely because of Hurricane Harvey, which caused a steep rise in regional refining crack indicators. This rise was partially offset by the impact of the hurricane on Valero’s refineries. Also, a fall in gasoline and distillate inventories in the market and Valero’s better-than-expected 2Q17 numbers could have supported VLO stock.

Peers’ stock performance

Since July 3, 2017, VLO’s peers Phillips 66 (PSX), Andeavor (ANDV), and Marathon Petroleum (MPC) have risen by 12.3%, 13.2%, and 7.1%, respectively. HollyFrontier (HFC) and PBF Energy (PBF) stocks rose even more sharply, by 28.9% and 18.5%, respectively, in the same period.

The SPDR S&P 500 ETF (SPY) rose by 5.2% since July 3. Valero stock, with its 14.5% gain in the period, beat SPY.

In the next part of this series, we’ll evaluate VLO’s moving averages ahead of earnings.

  1. U.S. Energy Information Administration

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