Valero Energy: Analysts’ Recommendations and Target Price



Analysts’ ratings

For Valero Energy (VLO), 15 (or 75%) of the 20 analysts covering the stock recommended a “buy,” while five recommended a “hold.”

In the past year, analysts’ “buy” ratings for Valero Energy have risen. In March 2018, Valero Energy had 45% “buy” ratings. The ratings have risen to 75% in March. During the same period, Valero Energy’s mean target price increased 4% to $107 per share.

Valero Energy’s mean target price implies a 26% gain from the current level. Recently, Raymond James raised its target price on Valero Energy from $100 to $105. RBC increased its target price on the stock from $95 to $99.

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Analysts’ favorable opinion

Valero Energy has steadily progressed on its growth path with a focus on the diversified earnings model. Analysts expect Valero Energy’s earnings growth to accelerate next year. The company’s earnings are expected to rise 57% in 2020. In 2019, the company’s earnings are expected to stay flat. Most of Valero Energy’s peers are expected to post lower earnings in 2019.

Due to the fall in RIN prices, Valero Energy saw a $406 million YoY decline in its RIN cost to $536 million in 2018. The decline is a favorable development for Valero Energy. The decline points to cost savings and better earnings.

Valero Energy’s strong financials, denoted by the lower total debt-to-capital ratio and comfortable liquidity position, could be the reason for analysts’ favorable opinion. We’ll discuss Valero Energy’s debt and cash flows later in this series.

Growth activities, the lower RIN cost, and strong financials could be the reasons for more “buy” ratings for Valero Energy.

Peers’ ratings

Marathon Petroleum (MPC), HollyFrontier (HFC), and Phillips 66 (PSX) have been rated as a “buy” by 100%, 22%, and 63% of the analysts, respectively. Delek US Holdings (DK) and PBF Energy (PBF) have been rated as a “buy” by 56% and 47% of the analysts, respectively.


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