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Why Valero Stock Fell 1.5% despite Its 1Q17 Earnings Beat

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Apr. 26 2017, Updated 5:05 p.m. ET

Valero’s stock performance

Valero Energy (VLO) announced its results before the market opened on April 25, 2017. The stock received a positive opening. 

VLO opened at $67.2 per share, higher than its previous day’s close of $66.8. It saw a high of $67.7 and a low of $65.0 during the day. Eventually, it closed at $65.8, 1.5% lower than its previous day’s close.

The fall in Valero’s stock price despite its surpassing estimates may have been due to its renewable fuel blending obligation. In VLO’s 1Q17 earnings transcript, Joe Gorder, VLO’s chair, president, and CEO, said of the company’s RIN (Renewable Identification Number) costs, “While RINs prices have declined relative to 2016, they were still a significant headwind for the quarter. At this level, RINs expense remains an issue for us, so we continue to work with regulators.”

On April 25, 2017, crude oil prices rose 0.7%, but natural gas prices fell 0.8%. VLO’s peers Marathon Petroleum (MPC) and HollyFrontier (HFC) fell 0.3% and 0.2%, respectively, on the day. However, Tesoro (TSO) and Phillips 66 (PSX) rose 0.8% and 0.7%, respectively, on the day.

Also, on April 25, broader market indicators such as the SPDR S&P 500 ETF (SPY) and the SPDR Dow Jones Industrial Average ETF (DIA) surged 0.6% and 1.1%, respectively.

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VLO’s 1Q17 update

Valero’s capex (or capital expenditure) in 1Q17 stood at $641 million. Valero expects its 2017 capex to be ~$2.7 billion, of which $1.1 billion is for growth projects and the rest is for sustenance projects.

In 1Q17, Valero also returned $629 million to shareholders in the form of dividends (~$315 million) and share repurchases (~$314 million).

Commenting on the refining environment, Gorder said, “U.S. refined product inventories have declined and are within their five-year ranges. Demand for gasoline and distillate remains strong both domestically and internationally. Combined with expectations for continued sweet crude oil production growth and relatively low prices for crude and refined products, consumer demand should be robust this year.”

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