Valero Energy’s implied gains
We have ranked refining stock based on implied gains. The implied gains are calculated using analysts’ mean target price. Marathon Petroleum (MPC) and Phillips 66 (PSX) have higher implied gains at 59% and 40%, respectively. PBF Energy (PBF) and HollyFrontier (HFC) follow with 34% and 30% implied gains, respectively. Now, we’ll discuss Valero Energy’s (VLO) implied gains.
Valero Energy is a US downstream company with refining, ethanol, and renewable diesel business segments. The company is ranked fifth with 29% implied gains based on its target price. The implied gains have widened sharply due to a fall in the stock price. The stock has fallen 33% in the past year. During the same period, analysts’ mean target price on Valero Energy stock has decreased 13%.
Earnings growth, valuation, and dividend yield
Analysts expect Valero Energy’s earnings to fall 8% to $6.8 per share in 2019. In the first quarter, Valero Energy’s adjusted EPS was $0.34. The company’s earnings have fallen in the first quarter due to lower refining, ethanol, and renewable diesel earnings. However, the company saw a decline in its RIN (renewable identification number) expense. Valero Energy saw $115 million year-over-year declines in its RIN cost to $91 million in the first quarter. Read Have Valero’s Crack Indicators Surged in Q2? to learn more. Valero Energy stock trades at a forward PE ratio of 9.9x, which is above the peer average of 9.3x.
Valero Energy has consistently returned wealth to shareholders in the form of dividends and share buybacks. In the first quarter, Valero Energy paid $375 million in dividends and repurchased $36 million worth of shares. The company’s current dividend yield is 4.3%, which is above the peer average of 3.8%.
Valero Energy has the second-lowest implied gains with high valuations. However, the stock has the best dividend yield and a lower earnings decline rate.