Why Has Valero Stock Fallen 21% since the End of March?

In 2015 until the end of November, stocks of refining companies such as Valero Energy (VLO) witnessed an upward spiral. This was on the back of better refining margins and earnings.

However, refining stocks started falling in December 2015 with news of the abolition of the crude oil export ban in the United States. This raised fears of a fall in the refining margins of US refineries.

Swelling inventory levels of refined products coupled with narrowing cracks put further pressure on refining stocks. However, since then, refining stocks have had a seesaw performance on the back of a volatile refining environment.

Refining stocks’ downward journey paused in February 2016, and VLO’s regional refining crack indicators started strengthening. Amid stock price volatility, Valero rose 20% from February 8–March 28, 2016, and crossed over its 50-day and 200-day moving averages.

This was followed by a phase of volatile crack environment that finally showed weakness in June 2016. Since the end of March, VLO has fallen 21% of its value. VLO also broke below both its 50-day and 200-day moving averages in this period.

In the same period, Tesoro (TSO) fell 16%, Marathon Petroleum (MPC) fell 9%, and Phillips 66 (PSX) fell 12%. For exposure to VLO, you can consider the PowerShares Dynamic Large Cap Value ETF (PWV). PWV has a ~5% exposure to energy sector stocks.

Currently, Valero (VLO) is trading below its 50-day and 200-day moving averages.

In this series, we’ll take a look at analyst recommendations for Valero followed by the refining margin trend. We’ll look at the company’s crack and spread indicators for 2Q16 and evaluate its leverage trend and cash flow position. Finally, we’ll examine VLO’s valuations followed by its stock correlation with the price of crude oil, short interest position, and institutional holdings.

Let’s start with analyst ratings for Valero.