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Valero Stock: Why Is It Falling?

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Valero (VLO) stock lost 1.2% on Thursday and closed at $77.42. The stock fell after an analyst slashed the company’s target price. On Thursday, Cowen and Company decreased its target price on Valero stock from $101 to $95. However, Cowen reiterated its “outperform” rating. The target price reflects a potential upside of 22.7% from the company’s closing price.

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Valero stock

As of Thursday, Valero stock has risen 3.3% year-to-date. However, the stock has fallen 9.2% in August and 33.1% in the last 12 months. The stock is trading 12.5% above its 52-week low of $68.81 and 36.8% below its 52-week high of $122.42. The company’s market cap is $32.1 billion.

How do analysts view Valero stock?

Overall, analysts favor a “buy” rating for Valero stock. Among the analysts, 85% recommend a “buy,” while 15% recommend a “hold.” None of the analysts recommend a “sell.” On average, analysts’ 12-month target price for the stock is $102.53, which implies an upside potential of 32.4% from the closing price on Thursday. The stock’s median target price is $102.00.

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Forward PE ratio

Currently, Valero stock is trading at 14.47x its fiscal 2019 estimated EPS of $5.35. The stock is also trading at 7.95x its fiscal 2020 estimated EPS of $9.74. Analysts expect the adjusted EPS to fall 27.4% in fiscal 2019 and rise 82.1% in fiscal 2020. Valero Energy’s earnings will likely rise at a compound annual growth rate of 8.4% over the next five years. However, the company’s revenues could fall 10.7% in fiscal 2019 and rise 8.6% in fiscal 2020.

Valero stock looks overvalued considering its expected negative earnings growth in fiscal 2019. However, the stock appears undervalued considering its expected earnings growth of 82.1% and its PE ratio of 7.95x for fiscal 2020.

Financial performance

In the second quarter, Valero Energy reported revenues of $28.93 billion—a fall of 6.7% YoY (year-over-year) and $4.4 billion above the consensus estimate. The company reported an adjusted EPS of $1.51—a fall of 29.8% and $0.14 better than the consensus estimate of $1.37. To learn more about Valero Energy’s second-quarter performance, read Why Valero Stock Slumped on Q2 Earnings.

Analysts expect Valero Energy’s net revenues to see YoY changes of -14.7% to $26.30 billion in the third quarter and -13.1% to $24.98 billion in the fourth quarter. Analysts also expect the company’s adjusted EPS to see YoY changes of -8.5% to $1.84 in the third quarter and -21.2% to $1.67 in the fourth quarter.

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