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Does Wall Street Expect Valero Energy’s Q4 Earnings to Fall?

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Third-quarter performance versus expectations

Valero Energy (VLO) is expected to publish its fourth-quarter earnings results on January 31, 2019. Before we proceed with the company’s fourth-quarter estimates, let’s recap its third-quarter performance compared to the estimates.

In the third quarter, Valero’s revenue surpassed Wall Street analysts’ mean estimate by ~9%. Also, Valero reported EPS of $2.01, which surpassed analysts’ estimated EPS of $1.95 by ~3%. Valero’s third-quarter EPS were also 5% higher than its third-quarter adjusted EPS in 2017.

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Valero’s net income attributable to its shareholders rose from $841 million in the third quarter of 2017 to $856 million in the third quarter of 2018 due to higher other income and lower interest and tax expenses. However, Valero’s operating earnings stood lower YoY (year-over-year) in the third quarter due to lower refining and ethanol earnings partially offset by higher VLP (or midstream) earnings.

Valero’s fourth-quarter estimates

Analysts expect Valero to post EPS of $0.9 in the fourth quarter of 2018, 23% lower than its adjusted EPS in the fourth quarter of 2017 and 56% lower than its adjusted EPS in the third quarter of 2018. Valero’s revenue is expected to be ~$25.3 billion in the fourth quarter, ~4% lower than its revenue in the fourth quarter of 2017.

Valero’s refining crack indicators point toward a likely fall in the company’s refining margin YoY in the fourth quarter. However, the impact of its weaker refining margin on its earnings could be partly offset by the likely fall in its renewable identification number costs in the quarter. We’ll discuss this possibility in the next article.

Wall Street analysts expect Phillips 66’s (PSX) and HollyFrontier’s (HFC) EPS to rise 132% YoY and 152% YoY, respectively, in the fourth quarter. Marathon Petroleum’s (MPC) and Delek US Holdings’ (DK) EPS are expected to rise 28% and 174%, respectively, in the fourth quarter compared to the fourth quarter of 2017.

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