Valero’s 1Q18 Earnings Beat Estimates, Refining Margins Expand



Valero’s 1Q18 Earnings: Estimated and actual performance

Valero Energy (VLO) posted its 1Q18 results yesterday. Let’s compare VLO’s 1Q18 performance to estimates.

In 1Q18, VLO’s revenue beat Wall Street analysts’ consensus estimate by ~16%. Plus, VLO reported EPS (earnings per share) of $1.09. However, adjusting for special items, we find that Valero’s adjusted EPS stood at $1.0—around 7% higher than its estimated EPS of $0.9. VLO’s 1Q18 EPS were also 47% higher than its 1Q17 adjusted EPS. VLO’s refining margins rose year-over-year in 1Q18.

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Valero’s 1Q18 earnings review

VLO’s net income attributable to shareholders rose from $305 million in 1Q17 to $469 million in 1Q18. Adjusting for special items like the blender’s tax credit, we see that VLO’s adjusted earnings stood at $431 million. An across-the-board rise in segmental earnings led to the rise in earnings.

Also, operating income from the refining segment, VLP (or midstream), and ethanol segment rose in 1Q18 over 1Q17. VLO’s gross refining margin widened by $0.3 per barrel year-over-year to $8.4 per barrel in 1Q18. The rise in the refining margin was due to a rise in diesel cracks across Valero’s operating region. However, gasoline cracks have shown a mixed trend across regions.

Valero’s refining income was affected by a larger biofuel blending obligation resulting from the procurement of RINs (renewable identification numbers). The RINs cost stood at $206 million in 1Q18, around $60 million higher than 1Q17.

Peers’ expected performance

VLO’s peers are also expected to post a rise in their earnings in 1Q18. Marathon Petroleum (MPC) and Phillips 66 (PSX) are expected to post 169% YoY and 59% YoY higher EPS in 1Q18, respectively. Also, Andeavor (ANDV) is expected to post 6% YoY higher EPS in 1Q18. HollyFrontier (HFC) is expected to post positive EPS in 1Q18, compared to negative EPS in 1Q17. Also, PBF Energy (PBF) and Delek US Holdings (DK) are expected to post smaller losses in 1Q18 than in 1Q17.


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