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Valero’s Q3 Earnings Growth: Lowest Compared to MPC, PSX, HFC

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Valero comes in last

In this series, we’re ranking four refiners on their estimated YoY (year-over-year) growth in earnings for the third quarter of 2018. So far, we’ve reviewed HollyFrontier (HFC), Phillips 66 (PSX), and Marathon Petroleum (MPC).

HollyFrontier is first with 60% YoY estimated earnings growth in the third quarter of 2018, followed by Phillips 66 with 44% earnings growth and Marathon Petroleum with 3% earnings growth. Now let’s review Valero Energy’s (VLO) estimated earnings growth for the quarter.

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Valero’s third-quarter estimates

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

Valero’s crack indicators fell YoY in all its four operating zones in the third quarter. In the US West Coast, the refining crack indicator fell $5.80 per barrel over Q3 2017 to $15.30 per barrel, the highest fall of all the regions.

North Atlantic and US Gulf Cost fell $3.70 per barrel and $3.10 per barrel, respectively, in the third quarter. US Midcontinent had the smallest fall of $0.20 per barrel YoY in the quarter. Perhaps the fall in indicators across regions mean an overall fall in Valero’s refining margin in Q3 2018 over Q3 2017.

However, Valero could benefit from the decline in RIN (Renewable Identification Numbers) prices. According to Valero’s data, prices of Ethanol RINs declined 75% YoY to an average of 20.7 cents per gallon in the third quarter. Biodiesel RIN prices have fallen 62% YoY to 41.5 cents per gallon in the third quarter. That could be a massive respite for Valero, which has borne the brunt of substantial compliance costs.

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