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Can Valero Energy Meet Wall Street’s Estimate in Q3 2018?

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How Valero performed in the second quarter

Valero Energy (VLO) is expected to publish its Q3 2018 results on October 25. Before we look at the third-quarter estimates, let’s see how Valero performed in the second quarter and compare that to Wall Street analysts’ estimates.

In the second quarter, Valero’s revenue surpassed analysts’ consensus estimate by ~22%. It reported EPS of $1.96. However, after adjusting for special items, its adjusted EPS was $2.15, which is 8.77% higher than the estimated EPS of $1.98. It was also 75% higher than its Q2 2017 adjusted EPS. Its refining margins rose year-over-year in the second quarter.

Valero’s net income attributable to its shareholders rose from $548 million in Q2 2017 to $845 million in Q2 2018. Adjusting for special items, its adjusted earnings were $928 million. Operating income from the refining, VLP (or midstream), and ethanol segments rose in Q2 2018 compared to Q2 2017.

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Valero’s Q3 2018 estimates

Wall Street analysts estimate that Valero could post EPS of $2 in the third quarter of 2018. That’s 3% higher than its Q3 2017 adjusted EPS but 9% lower than its adjusted EPS in Q2 2018. Its revenues are estimated at $28.3 billion for the third quarter, which is 20% higher than the third quarter of 2017.

Valero’s refining crack indicators point to a likely fall in its refining margin year-over-year. However, the impact of a weaker refining margin on earnings could be partially offset by a fall in RIN (Renewable Identification Number) prices in the quarter. We’ll take a closer look at that in the next part of this series.

By comparison, Wall Street analysts expect Phillips 66’s (PSX) and HollyFrontier’s (HFC) EPS to rise 44% and 60%, respectively, year-over-year in the third quarter of 2018. Analysts expect Marathon Petroleum’s (MPC) and Delek US Holdings’ (DK) EPS to rise 3% and 175%, respectively, year-over-year that quarter.

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