Wall Street Expects Stellar Second-Quarter Earnings from Valero



First-quarter performance versus expectations

Valero Energy (VLO) is expected to publish its second-quarter results on July 26. Before we proceed with its second-quarter estimates, let’s recap Valero’s first-quarter performance versus its estimates.

In the first quarter, VLO’s revenue surpassed Wall Street analysts’ consensus estimate by ~16%. Also, VLO reported EPS of $1.09. After adjusting for special items, Valero’s adjusted EPS stood at $1.0, ~7% higher than its estimated EPS of $0.9. VLO’s first-quarter EPS were also 47% higher than its adjusted EPS in the first quarter of 2017. VLO’s refining margins rose YoY (year-over-year) in the first quarter.

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VLO’s net income, attributable to its shareholders, rose from $305 million in the first quarter of 2017 to $469 million in the first quarter of 2018. On adjusting for special items such as the blender’s tax credit, VLO’s adjusted earnings stood at $431 million. An across-the-board rise in segmental earnings led to a rise in its earnings.

Valero’s second-quarter estimates

Wall Street analysts estimate that Valero could post EPS of $2.1 in the second quarter, 70% higher than its adjusted EPS in the second quarter of 2017 and almost double (109% higher than) its adjusted EPS in the first quarter. Also, VLO’s revenue is expected to be ~$26.4 billion in the second quarter, ~18% higher than its revenue in the second quarter of 2017.

VLO’s refining crack indicators point toward a likely rise in the company’s refining margin, yearly as well as sequentially, in the second quarter. We’ll discuss this in the next article.

Analysts expect Phillips 66 (PSX) and HollyFrontier’s (HFC) EPS to rise 100% YoY and 151% YoY in the second quarter, respectively. Marathon Petroleum (MPC) and Andeavor (ANDV) are expected to post EPS rises of 77% and 83%, respectively, in the second quarter on a YoY basis. PBF Energy (PBF) and Delek US Holdings (DK) are expected to post profits in the second quarter compared to the losses they posted in the second quarter of 2017.


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