Valero’s 2Q17 earnings
Valero Energy (VLO) posted its 2Q17 results on July 27, 2017. But before we proceed with the earnings review, let’s compare VLO’s 2Q17 performance with the estimates.
In 2Q17, VLO’s revenue surpassed the Wall Street analysts’ consensus estimate by ~10.5%. VLO reported EPS (earnings per share) of $1.23, which was ~12% higher than its estimated EPS of $1.10.
VLO’s 2Q17 EPS was also 15% higher than its 2Q16 adjusted EPS. VLO’s refining margin rose slightly in 2Q17 on a YoY (year-over-year) basis.
Valero’s 2Q17 earnings review
In 2Q17, VLO’s net income fell 33% YoY to $548 million due to inventory valuation benefits in 2Q16. But excluding inventory valuation benefits, VLO’s adjusted net income rose from $503 million in 2Q16 to $548 million in 2Q17.
The increase in VLO’s adjusted net income was due to the rise in the operating earnings of its VLP segment or midstream earnings. The rise in the Adjusted Refining segment’s earnings was somewhat offset by a decline in adjusted ethanol earnings.
VLO’s gross refining margin widened by $0.07 per barrel YoY to $8.66 per barrel in 2Q17. A marginal rise in the refining margin was due to the mixed trend observed in oil spreads and gasoline and diesel cracks.
However, VLO’s refining income was impacted by larger biofuel blending obligations resulting from the procurement of RINs (renewable identification numbers). RIN costs stood at $255 million in 2Q17, which was ~$82 million higher YoY.