Valero’s 4Q15 Earnings Came out Better Than Estimated



Valero’s 4Q15: Estimated and actual performance

Valero Energy Corporation (VLO) has posted its 4Q15 results. Before we proceed with the earnings review, let’s quickly examine VLO’s 4Q15 performance versus estimates. In 4Q15, VLO’s revenues have surpassed Wall Street analysts’ estimates by 8.7%. Additionally, the adjusted EPS (earnings per share) stand at $1.8, around 22% higher than the estimated EPS of $1.5. However, that’s 2% lower than the 4Q14 adjusted EPS. VLO’s refining margins also fell in the fourth quarter.

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Valero’s 4Q15 earnings are better than expected

In 4Q15, VLO’s adjusted net income at $862 million fell by 9% compared to 4Q14. This was due to a marginal fall in the adjusted operating income of its refining segment, coupled with a steep fall in income at its ethanol segment.

VLO’s refining margin contracted by $0.3 per barrel over 4Q14 to $10.9 per barrel in 4Q15. This was due to narrowing diesel cracks across its operating areas in the United States. Plus, the adjusted operating income from VLO’s ethanol segment fell to $37 million in 4Q15 due to plunging ethanol prices.

Sequentially, VLO’s EPS fell by 36% in 4Q15. VLO’s peers include Marathon Petroleum Corporation (MPC), Tesoro Corporation (TSO), and Phillips 66 (PSX). As per Wall Street analysts’ estimates, they are respectively expected to post EPS in 4Q15 that are lower by 66%, 68%, and 58% compared to 3Q15. The Energy Select Sector SPDR Fund (XLE) has ~12% of combined exposure to VLO, MPC, TSO, and PSX.

VLO’s yearly performance

In 2015, VLO’s revenues stood at $87.8 billion, surpassing estimates by 1%. But, the 2015 revenues are 33% lower than the 2014 revenues. Note that stronger refining margins made a difference to the bottom line, resulting in higher earnings. In 2015, Valero reported gross refining margin of $13 per barrel compared to $11 per barrel in 2014. Also, VLO reported adjusted EPS of $9.3 in 2015, beating Wall Street analysts’ estimates by 5%. Finally, the 2015 adjusted EPS were 38% higher than the 2014 adjusted EPS.


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