Valero Energy Q3 Earnings: Time To Buy Struggling NYSE:VLO Stock?

in EARNINGS/INVESTING IDEAS by

Valero Energy Corporation (NYSE:VLO) is scheduled to report Q3 earnings results on October 22, 2020.

The company is expected to report earnings of -$1.20/share on revenue of $14.787 billion. The consensus earnings per share (EPS) of -$1.20/share is based on a poll of 13 analysts and represents a decline in eps of −181.3% over the same quarter last year, when the company reported earnings of $1.48/share.

The revenue forecast of $14.787 billion based on a poll of 7 analysts implies a year-over-year (YoY) decline in revenue of −45.7%. Last year the company reported $27.249 billion in revenue for the quarter.

Expected to report EPS of -$1.20/share for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $14,786.64 $27,249.00 −45.7%
EPS -$1.20 $1.48 −181.3%

Earnings Call Trends

Management has been great at managing analyst expectations historically. The company has a perfect record over the last 8 tracked quarters of exceeding earnings guidance.

What are your expectations from Valero Energy Corporation for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 -$1.40 -$1.25 10.8% Beat
Q1, 2020 -$0.15 $0.34 320.2% Beat
Q4, 2019 $1.63 $2.13 30.3% Beat
Q3, 2019 $1.35 $1.48 9.6% Beat
Q2, 2019 $1.51 $1.51 −0.2% Missed
Q1, 2019 $0.23 $0.34 48.5% Beat
Q4, 2018 $1.11 $2.12 90.4% Beat
Q3, 2018 $1.95 $2.01 2.9% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −5.8%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 30, 2020 $59.69 $56.23 −5.8% Decline
April 29, 2020 $57.87 $63.35 9.5% Increase
January 30, 2020 $86.46 $84.31 −2.5% Decline
October 24, 2019 $93.85 $99.27 5.8% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −3.24, the model suggests that the company is not likely to be an earnings manipulator. A value of −3.24 implies a 0.1% chance of earnings manipulation.

Fundamentals And Technical Analysis

Valero Energy Corporation is currently trading at $39.29/share, down −2.3% for the day. The company is trading at approximately 38.5% of its 52-week high of $101.99/share. The company’s stock price is down −30.1% since the last earnings report and down −5.2% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 29.75 suggests the company is trading in technically oversold territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:VLO Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 15.07 and a forward P/E multiple of −13.94.

Valero Energy Corporation’s current share price also implies a price-to-book (P/B) multiple of 0.81. The following table summarizes some other key fundamental ratios:

Data as of October 20, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $39.29
P/E Ratio 15.1x
P/E Ratio (Fwd) −13.9x
PEG Ratio −0.3
Total Debt / Total Capital 44.6%
Levered Free Cash Flow $1.883 billion
EV / EBITDA 6.4x

Finbox

Valero Energy Corporation is a large-cap stock with a market capitalization of $16.021 billion and a total enterprise value of $28.411 billion. The company operates in the Energy sector and the Oil, Gas & Consumable Fuels industry.

Valero Energy Corporation manufactures and sells transportation fuels and petrochemical products in the United States, Canada, the United Kingdom, Ireland, and internationally. It operates through three segments: Refining, Ethanol, and Renewable Diesel. The company is involved in oil and gas refining, marketing, and bulk selling activities. It produces conventional and premium gasolines, gasoline meeting the specifications of the California Air Resources Board (CARB), diesel fuels, low-sulfur and ultra-low-sulfur diesel fuels, CARB diesel, other distillates, jet fuels, asphalts, petrochemicals, lubricants, and other refined petroleum products. As of December 31, 2019, the company owned 15 petroleum refineries with a combined throughput capacity of approximately 3.15 million barrels per day. It markets its refined products through wholesale rack and bulk markets; and through approximately 7,000 outlets under the Valero, Beacon, Diamond Shamrock, Shamrock, Ultramar, and Texaco brand names. The company also produces and sells ethanol, distiller grains, and corn oil primarily to refiners and gasoline blenders, as well as to animal feed customers. It owns and operates 14 ethanol plants with a combined ethanol production capacity of approximately 1.73 billion gallons per year. In addition, the company owns, operates, develops, and acquires crude oil and refined petroleum products pipelines, terminals, and other transportation and logistics assets. Further, it owns and operates a plant that processes animal fats, used cooking oils, and other vegetable oils into renewable diesel. The company was formerly known as Valero Refining and Marketing Company and changed its name to Valero Energy Corporation in August 1997. Valero Energy Corporation was founded in 1980 and is headquartered in San Antonio, Texas.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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