Valero Energy Corp

Tesoro stock, continuing its 2015 downtrend, had a weak opening to 2016. TSO traded below its 50-day moving average but above its 200-day moving average.

On July 23, Brent crude oil September futures settled ~$5.17 higher than WTI crude oil September futures.

HollyFrontier (HFC) stock has risen 5.5% since January 2. The stock has risen less than its peers Marathon Petroleum (MPC) and Valero (VLO).

We began this series by ranking the growth in refiners’ second-quarter earnings. In the preceding two parts, we looked at the two highest probable growth achievers for Q2 2018.

Valero Energy’s institutional holdings currently stand at ~86% and have fallen since the end of February 2016, when its institutional holdings stood at 98%.

After HollyFrontier’s earnings, RBC lowered its target price on the stock from $68 to $66.

The merged entity would have 16 refineries with around 3 million barrels per day (or MMbpd) of capacity spread across the US.

It’s expected distillate production will grow by the end of 2014. Refineries have built new facilities to produce more distillates than gasoline in anticipation of strong global demand growth.

In this series, we’ll be sorting refining stocks in terms of earnings expectations for 4Q17. If we rank them on their likely YoY growth in EPS, then Andeavor (ANDV) occupies the top slot.

Marathon Petroleum (MPC) is scheduled to report its first-quarter results on May 8.

In 4Q15, according to Wall Street analyst estimates, Valero is expected to post EPS of $1.40, which would be 23% lower than its 4Q14 adjusted EPS.

HollyFrontier’s refining segment is critical for its overall earnings. The refining segment’s adjusted EBITDA rose 127% to $1.7 billion in 2018.

Tesoro (TSO) noted a contraction in its GRM (gross refining margin) by $10.4 per barrel YoY (year-over-year) to $9.1 per barrel in 3Q16.

The immediate effect of the current crisis between Russia and Ukraine is that it has likely provided some support to oil prices and caused some volatility in oil prices.

Valero’s liquidity In 1H17, Valero Energy (VLO) generated $2785 million in cash from operations. The company had cash outflows of $880 million in the form of capital expenditure and deferred turnaround and catalyst costs and $627 million in the form of dividends. Valero’s liquidity surplus Valero’s cash outflows amounted to around $1507 million in 1H17, […]

Marathon Petroleum’s solvency ratios are higher than the industry average, which is not a comfortable situation.

Institutional holdings in Phillips 66 currently stand at ~69%. This level indicates confidence or sentiment from sophisticated market participants.

Valero Energy (VLO) is the second-highest dividend-yielding stock among the seven refining stocks we’re looking at in this series.

With refining modernization projects and midstream and chemical expansion projects, Phillips 66 is set to create a growth-oriented diversified earnings model.

Marathon Petroleum’s (MPC) operating income rose 51% yearly to $440 million in the first quarter. The rise in midstream earnings mainly led to the rise in operating income.

Distillate demand and stock levels drive crude demand and crude prices. As a result, energy investors watch distillate inventories closely.

The highest and lowest 12-month price targets for Tesoro’s stock stand at $120 and $84, respectively.

Phillips 66 (PSX) posted its earnings on July 29, 2016. On the day, PSX’s implied volatility fell by 5% to 23.2 compared to the previous day.

Barclays, Goldman Sachs, Credit Suisse, and Wolfe Research have positive recommendations for the stock. They gave price targets equal to $80 per share or above.

Seadrill Partners (SDLP), the MLP involved mainly in offshore drilling, continued to be among the top MLP gainers for the second consecutive week.

Valero Energy witnessed a fall across the board in its refining operating income in 3Q16. The US West Coast saw the largest fall in its per-barrel refining operating earnings.

Let’s analyze the correlations between oil prices and the top four American refiners: Marathon Petroleum (MPC), Valero Energy (VLO), Tesoro (TSO), and Phillips 66 (PSX).

The EIA’s weekly gasoline and diesel fuel price update released on January 11, 2016. It showed that US regular gasoline prices averaged $1.99 per gallon.

In 1Q17 to date, Tesoro’s refining index values have shown a mixed trend compared to 4Q16, quarter-over-quarter.

In 2Q17, Phillips 66’s revenues missed Wall Street analysts’ estimates by 1%. However, its 2Q17 adjusted EPS of $1.09 surpassed estimates of $1.01.

Valero Energy (VLO) announced its results on October 25, 2016, before the markets opened.

In the first quarter, Valero observed the highest rise in its net debt. VLO’s net debt rose 42.0% sequentially to $4.3 billion.

Currently, Marathon Petroleum (MPC) trades at a forward PE ratio of 9.0x, which is below the peer average of 9.9x.

In 3Q15, Valero noted a rise in its gross refining margin by $2.6 per barrel to $14.4 per barrel, compared to what we saw in 3Q14.

Implied volatility in ANDV has risen sharply by 13.8% since January 2, 2018, to its current level of 32.9%.

In this article, we’ll compare the gross refining margins of leading American downstream companies.

Of the 17 analysts covering Andeavor (ANDV), 15 (88%) have rated the stock a “buy” so far in August 2017. Two analysts have rated ANDV a “hold.”

The correlation coefficient of VLO and WTI has risen to 0.51 in the past one-month period compared to 0.07 in the past one-year period.

In this article, we’ll look at the fourth refiner on our list: Delek US Holdings (DK). Delek has 56% “buy” ratings from analysts.

Marathon Petroleum’s (MPC) dividend payments have been growing steadily for the past few years.

Currently, MPC trades at a forward PE (price-to-earnings) ratio of 14.8x, above its peer average of 13.8x.

On a sequential basis, Marathon’s operating income fell by 78%. All the segments reported declines in income in 4Q15 over 3Q15.

Inventories provide a useful snapshot of distillate demand and supply trends, particularly near and during the winter months.

Before analyzing Tesoro’s (TSO) refining index for 2Q16, let’s take a look at TSO’s refining margin trend up to 1Q16.

From 3Q14 to 3Q15, PSX maintained average quarterly cash flow from operations at $1.1 billion. The company has continued its focus on preserving growth.

The benchmark US Gulf Coast 3:2:1 crack spread rose ~25% last week. It hit $13.115 per barrel on Friday, September 25

The EIA (U.S. Energy Information Administration) reported that US gasoline stocks fell by 4.6 MMbbls (million barrels) to 245.1 MMbbls for the week ending March 18, 2016.

In 2Q17, Phillips 66 (PSX) rose, likely due to its 1Q17 numbers.

Last week, gasoline inventories increased by 1 MMbbls (million barrels) to 204.6 MMbbls.

Phillips 66’s (PSX) refining operations yielded 45% gasoline and 39% distillates in the fourth quarter.

The EIA reported that gasoline inventories decreased by 2.8 MMbbls to ~223.9 MMbbls in the week ending May 15. Analysts expected inventories to increase.

Since Marathon Petroleum’s third-quarter earnings, the stock has been rated by 17 analysts. All of the analysts assigned “buy” or “strong buy” ratings.

Tesoro Corporation’s (TSO) stock was on an uptrend in 2015, fueled by healthy refining margins. TSO rose 21% in the trailing 12 months up to January 20, 2016.

US distillate fuel inventories fell by ~1.1 MMbbls (million barrels) to settle at 164.5 MMbbls for the week ending January 15, 2016.

Valero’s total refining capacity is 3.0 MMbpd (million barrels per day), of which 1.7 MMbpd is located in the US Gulf Coast.

Valero Energy (VLO) released its fourth quarter earnings on January 29. The company reported a net income of $1.2 billion.

In the first half of 2018, Marathon Petroleum (MPC) had $2.249 billion in cash from operations. The company had cash outflows of $1.466 billion.

In this series, we’ll perform a cross-sectional analysis of refining stocks. We’ll examine their moving averages and eight-day price forecasts based on implied volatility, and compare their leverage, liquidity, capex, and refining margins.

The higher percentage of “hold” ratings for HollyFrontier could be due to its earnings outlook.

Net income reported for this quarter reflected discontinued operations at Valero’s Aruba refinery—as a result of this, the company recognized a loss of $63 million associated with asset retirement and other obligations related to the Aruba refinery.

Tesoro (TSO) noted a rise in its gross refining margin by $1.90 per barrel year-over-year to $9.40 per barrel in 1Q17.

Now let’s look at Phillips 66’s moving averages in the current quarter.

Valero Energy (VLO) has witnessed a rise in its stock price since February 2016. In this series, we will provide you with an update on the company’s operations, financials, and market performance.

On December 1–8, 2017, midstream stock NGL Energy Partners LP (NGL) was the largest gainer among energy stocks.

The correlation coefficient of Phillips 66 (PSX) versus WTI stands at 0.40.

Four (27%) of the 15 analysts covering DK have rated it a “buy” so far in August 2017.

Valero’s PEG ratio stands at 0.50, below the peer average of 0.60.

Marathon Petroleum traded at an average PE (price-to-earnings ratio) of 12.5x from 1Q15 to 1Q17. MPC’s PE ratio rose to 22.9x in 1Q17 from 11.7x in 1Q15 due to a rise in its stock price.

Valero Energy (VLO) posted its 2Q17 results on July 27, 2017. Its revenue surpassed the Wall Street analyst consensus estimate by ~10.5%.

Since the beginning of the third quarter on July 2, Marathon Petroleum (MPC) stock has risen 17%. The stock outperformed the SPDR S&P 500 ETF (SPY).

Last week, as of March 23, residential heating oil prices averaged ~$2.93 per gallon—~11 cents per gallon lower than the week before.

On December 10, 2015, Third Avenue Management announced that redemptions were barred from the Third Avenue Focused Credit Fund (TFCVX) (TFCIX).

In the July 2 week, XLE’s top five holdings fell in the range of 0.85% to 3%, which was quite subdued compared to the losses USO saw during the week.

Valero Energy (VLO) posted its 1Q17 results on April 25, 2017. Before we proceed with an earnings review, let’s quickly examine VLO’s 1Q17 performance versus its estimates.

On December 26, Brent crude oil February futures settled at ~$8.25—higher than WTI crude oil February futures.

Like gasoline and distillates, heating oil consumption or demand trends matter to refineries.

Refining sector stocks usually perform in line with refining margins and cracks. Since February 2016, refining stocks have been putting up volatile performances.

Marathon Petroleum is growing with its capex and acquisitions, including the latest acquisition of Andeavor.

In 3Q16, Tesoro’s (TSO) refining index values, which are regional crack indicators in the areas where TSO operates, have fallen compared to 3Q15.

The Brent-WTI crude oil spread was $3.78 per barrel on July 16, down from $4.22 per barrel on July 9. The Brent-WTI spread dropped ~10.4% from July 9 to July 16.

Now, let’s look at the forward valuations of Marathon Petroleum (MPC), Tesoro (TSO), Valero Energy (VLO), and Phillips 66 (PSX).

Short interest in Phillips 66 (PSX) expressed as a percentage of outstanding shares has fallen from 1.6% on May 30, 2018, to the current level of 1.1%.

The institutional holdings in Valero Energy (VLO) are higher than the institutional holdings in Marathon Petroleum (MPC), Phillips 66 (PSX), and Western Refining (WNR).

Marathon Petroluem’s net debt-to-EBITDA ratio stood at 1.9x in 4Q16. It’s lower than the average industry ratio of 2.8x.

The Keystone XL Pipeline project is a proposed 1,179-mile pipeline. It begins in Alberta, Canada and extends south to join the existing Keystone Pipeline in Steele City, Nebraska.

Currently, Marathon Petroleum (MPC) trades at a forward PE ratio of 12.6x—above its peer average of 11.9x.

US crude oil refinery inputs averaged 17.029 million barrels per day (or MMbpd) during the week ended August 7.

The correlation coefficient of Phillips 66 (PSX) and WTI stands highest among refiners at 0.42.

As of January 5, residential heating oil prices averaged ~$2.97 per gallon, ~$0.08 lower than last week and $1.05 lower than the same week last year.

Marathon Petroleum’s (MPC) valuations have slid due to a decline in its stock after the merger announcement.

In 4Q17, Andeavor’s (ANDV) gasoline production stood at 53.0% of its total refined products produced.

Since January 2, 2018, Marathon Petroleum stock has risen 0.7%, underperforming the SPDR S&P 500 ETF (SPY), the overall market indicator.

Now let’s review the stock that’s expected to post the fourth-highest gain: Phillips 66 (PSX).

Valero’s (VSO) cash flow excess as a percentage of CFO stands at 50%. Comparatively, Marathon Petroleum’s (MPC) excess stands at 11%.

Phillips 66’s (PSX) leverage ratio, its net debt-to-EBITDA, stood at 3.9x in 1Q17, which was higher than the average industry ratio of 2.2x.

In the previous part of this series, we discussed refining stocks’ dividend yield trends. Now, we’ll look at the forward valuations for Marathon Petroleum (MPC), Andeavor (ANDV), Valero Energy (VLO), and Phillips 66 (PSX).

Marathon Petroleum (MPC) has been rated by 19 Wall Street analysts. Seventeen analysts (or 89%) have rated it as a “buy” so far in May 2017.

Average valuation multiples Earlier, we discussed refining stocks’ performance in 1Q17 and compared their dividend yields. In this part, we’ll look at Marathon Petroleum’s (MPC), Tesoro’s (TSO), Valero Energy’s (VLO), and Phillips 66’s (PSX) forward valuation. The average forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiples and average forward PE […]