Core Insights - Valero Energy reported quarterly earnings of $2.28 per share, exceeding the Zacks Consensus Estimate of $1.73 per share, but down from $2.71 per share a year ago, resulting in an earnings surprise of +31.79% [1] - The company achieved revenues of $29.89 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 7.37%, although this is a decline from year-ago revenues of $34.49 billion [2] - Valero Energy's stock has increased by approximately 20.4% since the beginning of the year, outperforming the S&P 500's gain of 8.1% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $3.01 on revenues of $29.71 billion, and for the current fiscal year, it is $6.32 on revenues of $116.31 billion [7] - The estimate revisions trend for Valero Energy was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Oil and Gas - Refining and Marketing industry is currently ranked in the bottom 21% of over 250 Zacks industries, suggesting that the outlook for the industry can significantly impact stock performance [8] - Another company in the same industry, CVR Energy, is expected to report a quarterly loss of $0.08 per share, reflecting a year-over-year change of -188.9%, with revenues projected at $1.91 billion, down 3.1% from the previous year [9]

[Executive Summary](index=1&type=section&id=1.%20Executive%20Summary) Valero's Q2 2025 net income fell to $714 million, with mixed segment results and $695 million returned to stockholders Key Financial Highlights (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :------------------------------------ | :------- | :------- | :---------- | | Net Income Attributable to Valero Stockholders | $714 million | $880 million | -18.86% | | Earnings Per Share (EPS) | $2.28 | $2.71 | -15.87% | | Refining Operating Income | $1.3 billion | $1.2 billion | +8.33% | | Renewable Diesel Operating Income (Loss) | ($79 million) | $112 million | -170.54% | | Ethanol Operating Income | $54 million | $105 million | -48.57% | | Returned to Stockholders | $695 million | N/A | N/A | [Company Overview](index=3&type=section&id=2.%20Company%20Overview) Valero is a multinational energy company operating refineries, renewable diesel, and ethanol plants across three core segments - Valero is a multinational manufacturer and marketer of petroleum-based and low-carbon liquid transportation fuels and petrochemical products, selling primarily in the U.S., Canada, U.K., Ireland, and Latin America[15](index=15&type=chunk) - The company owns **15 petroleum refineries** with a combined throughput capacity of approximately **3.2 million barrels per day**[15](index=15&type=chunk) - Valero is a joint venture member in Diamond Green Diesel (DGD), which produces low-carbon fuels including renewable diesel and SAF, with a production capacity of approximately **1.2 billion gallons per year**[15](index=15&type=chunk) - Valero also owns **12 ethanol plants** with a combined production capacity of approximately **1.7 billion gallons per year**[15](index=15&type=chunk) - Operations are managed through its Refining, Renewable Diesel, and Ethanol segments[15](index=15&type=chunk) [Consolidated Financial Performance](index=6&type=section&id=3.%20Consolidated%20Financial%20Performance) Valero's Q2 2025 consolidated financial performance saw decreased net income and EPS, with total revenues declining year-over-year [Statement of Income Highlights](index=6&type=section&id=3.1%20Statement%20of%20Income%20Highlights) Q2 2025 revenues decreased to $29,889 million, with net income at $714 million and diluted EPS at $2.28, both down from Q2 2024 Consolidated Statement of Income Data (Millions of Dollars, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change (%) | | :----------------------------------------------------------------- | :------------------------------- | :------------------------------- | :------------- | | Revenues | $29,889 | $34,490 | -13.34% | | Operating income | $997 | $1,221 | -18.35% | | Net income attributable to Valero Energy Corporation stockholders | $714 | $880 | -18.86% | | Earnings per common share | $2.28 | $2.71 | -15.87% | [Non-GAAP Financial Measures Reconciliation](index=9&type=section&id=3.2%20Non-GAAP%20Financial%20Measures%20Reconciliation) Non-GAAP measures adjust for non-core items like impairment losses, with Q2 2025 adjusted net income and EPS aligning with GAAP figures - Non-GAAP measures are used to facilitate comparison of operating results between periods by adjusting for certain items not indicative of core operating performance, such as asset impairment loss, project liability adjustment, and second-generation biofuel tax credit[19](index=19&type=chunk)[62](index=62&type=chunk)[64](index=64&type=chunk) Adjusted Net Income and EPS Reconciliation (Q2 2025 vs Q2 2024) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :----------------------------------------------------------------- | :------------------------------- | :------------------------------- | | Net income attributable to Valero Energy Corporation stockholders | $714 | $880 | | Total adjustments | — | $7 | | Adjusted net income attributable to Valero Energy Corporation stockholders | $714 | $887 | | Earnings per common share – assuming dilution | $2.28 | $2.71 | | Total adjustments | — | $0.02 | | Adjusted earnings per common share – assuming dilution | $2.28 | $2.73 | - For the six months ended June 30, 2025, a significant adjustment was a **$1.1 billion asset impairment loss** related to the Benicia and Wilmington refineries, net of taxes[29](index=29&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk) [Segment Performance](index=1&type=section&id=4.%20Segment%20Performance) Valero's Q2 2025 segment performance was mixed, with Refining income up, Renewable Diesel reporting a loss, and Ethanol income declining [Refining Segment](index=1&type=section&id=4.1%20Refining%20Segment) Refining segment operating income rose to $1,266 million in Q2 2025, despite slightly lower throughput, due to improved refining margin per barrel Refining Segment Financials (Q2 2025 vs Q2 2024) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change (%) | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------- | | Operating Income (Millions $) | $1,266 | $1,224 | 3.43% | | Refining Margin (Millions $) | $3,284 | $3,052 | 7.60% | | Throughput volumes (thousand bbl/day) | 2,922 | 3,010 | -2.92% | | Refining margin per barrel of throughput | $12.35 | $11.14 | 10.86% | [U.S. Gulf Coast Region](index=11&type=section&id=4.1.1%20U.S.%20Gulf%20Coast%20Region) U.S. Gulf Coast refining operating income increased to $846 million in Q2 2025, driven by higher throughput and improved margin per barrel - Set a record for refining throughput rate in the U.S. Gulf Coast region in the second quarter of 2025[4](index=4&type=chunk) U.S. Gulf Coast Refining Performance (Q2 2025 vs Q2 2024) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change (%) | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------- | | Refining operating income (Millions $) | $846 | $686 | 23.32% | | Throughput volumes (thousand bbl/day) | 1,841 | 1,827 | 0.77% | | Refining margin per barrel of throughput | $11.78 | $10.36 | 13.71% | [U.S. Mid-Continent Region](index=11&type=section&id=4.1.2%20U.S.%20Mid-Continent%20Region) U.S. Mid-Continent refining operating income rose to $127 million in Q2 2025, with improved margin per barrel offsetting slightly lower throughput U.S. Mid-Continent Refining Performance (Q2 2025 vs Q2 2024) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change (%) | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------- | | Refining operating income (Millions $) | $127 | $111 | 14.41% | | Throughput volumes (thousand bbl/day) | 423 | 438 | -3.39% | | Refining margin per barrel of throughput | $10.52 | $9.73 | 8.12% | [North Atlantic Region](index=12&type=section&id=4.1.3%20North%20Atlantic%20Region) North Atlantic refining operating income decreased to $219 million in Q2 2025 due to lower throughput volumes and a slight decline in margin per barrel North Atlantic Refining Performance (Q2 2025 vs Q2 2024) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change (%) | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------- | | Refining operating income (Millions $) | $219 | $325 | -32.62% | | Throughput volumes (thousand bbl/day) | 396 | 469 | -15.56% | | Refining margin per barrel of throughput | $13.20 | $13.32 | -0.90% | [U.S. West Coast Region](index=12&type=section&id=4.1.4%20U.S.%20West%20Coast%20Region) U.S. West Coast refining income fell to $74 million in Q2 2025, impacted by a $1.1 billion impairment loss and planned Benicia refinery closure U.S. West Coast Refining Performance (Q2 2025 vs Q2 2024) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change (%) | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------- | | Refining operating income (Millions $) | $74 | $102 | -27.45% | | Throughput volumes (thousand bbl/day) | 262 | 276 | -5.07% | | Refining margin per barrel of throughput | $18.02 | $14.86 | 21.26% | - Recognized a combined asset impairment loss of **$1.1 billion** in the six months ended June 30, 2025, related to the Benicia and Wilmington refineries[27](index=27&type=chunk)[63](index=63&type=chunk) - Valero intends to cease refining operations at its Benicia Refinery by the end of **April 2026**, leading to accelerated depreciation of its long-lived assets[63](index=63&type=chunk)[64](index=64&type=chunk) [Renewable Diesel Segment](index=1&type=section&id=4.2%20Renewable%20Diesel%20Segment) The Renewable Diesel segment reported a $79 million operating loss in Q2 2025, a significant decline driven by lower sales volumes and margin per gallon Renewable Diesel Segment Financials (Q2 2025 vs Q2 2024) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change (%) | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------- | | Operating Income (Loss) (Millions $) | ($79) | $112 | -170.54% | | Renewable Diesel Margin (Millions $) | $54 | $254 | -78.74% | | Sales volumes (thousand gallons/day) | 2,732 | 3,492 | -21.76% | | Renewable Diesel margin per gallon of sales | $0.22 | $0.80 | -72.50% | [Ethanol Segment](index=2&type=section&id=4.3%20Ethanol%20Segment) Ethanol segment operating income decreased to $54 million in Q2 2025, as a significant decline in margin per gallon offset slightly increased production volumes Ethanol Segment Financials (Q2 2025 vs Q2 2024) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change (%) | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------- | | Operating Income (Millions $) | $54 | $105 | -48.57% | | Ethanol Margin (Millions $) | $217 | $247 | -12.15% | | Production volumes (thousand gallons/day) | 4,583 | 4,474 | 2.44% | | Ethanol margin per gallon of production | $0.52 | $0.61 | -14.80% | [Liquidity, Capital Management & Shareholder Returns](index=1&type=section&id=5.%20Liquidity,%20Capital%20Management%20%26%20Shareholder%20Returns) Valero maintained a strong balance sheet with $4.5 billion cash, generated $936 million in operating cash, and returned $695 million to stockholders in Q2 2025 [Balance Sheet Data](index=3&type=section&id=5.1%20Balance%20Sheet%20Data) As of June 30, 2025, Valero reported $4.5 billion cash, $8.4 billion total debt, and a 19 percent net debt to capitalization ratio Balance Sheet Highlights (Millions of Dollars) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Cash and cash equivalents | $4,537 | $4,657 | | Total debt | $8,370 | $8,085 | | Total finance lease obligations | $2,277 | $2,378 | | Valero Energy Corporation stockholders' equity | $24,078 | $24,512 | - The debt to capitalization ratio, net of cash and cash equivalents, was **19 percent** as of June 30, 2025[12](index=12&type=chunk) - Valero repaid the **$251 million** outstanding principal balance of its 2.85% Senior Notes that matured in April 2025[5](index=5&type=chunk)[12](index=12&type=chunk) [Cash Flow and Capital Investments](index=2&type=section&id=5.2%20Cash%20Flow%20and%20Capital%20Investments) Q2 2025 net cash from operating activities was $936 million, with adjusted cash at $1.3 billion, and capital investments totaled $407 million Cash Flow and Capital Investments (Q2 2025 vs Q2 2024) | Metric | Three Months Ended June 30, 2025 (Millions $) | Three Months Ended June 30, 2024 (Millions $) | YoY Change (%) | | :----------------------------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------- | | Net cash provided by operating activities | $936 | $2,472 | -62.14% | | Adjusted net cash provided by operating activities | $1,347 | $1,600 | -15.81% | | Capital investments | $407 | $420 | -3.09% | | Capital investments attributable to Valero | $399 | $360 | 10.83% | - Included in net cash provided by operating activities was a **$325 million** unfavorable impact from working capital and **$86 million** of adjusted net cash used in operating activities associated with the other joint venture member's share of DGD[8](index=8&type=chunk) - Of the total capital investments, **$371 million** was for sustaining the business, including costs for turnarounds, catalysts, and regulatory compliance[9](index=9&type=chunk) [Shareholder Returns](index=1&type=section&id=5.3%20Shareholder%20Returns) Valero returned $695 million to stockholders in Q2 2025 through $354 million in dividends and $341 million in stock buybacks - Returned **$695 million** to stockholders in the second quarter of 2025[5](index=5&type=chunk)[10](index=10&type=chunk) Shareholder Returns (Q2 2025 vs Q2 2024) | Metric | Three Months Ended June 30, 2025 (Millions $) | Three Months Ended June 30, 2024 (Millions $) | YoY Change (%) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------- | | Dividends paid | $354 | N/A | N/A | | Stock buybacks | $341 | N/A | N/A | | Dividends per common share | $1.13 | $1.07 | 5.61% | - The payout ratio was **52 percent** of adjusted net cash provided by operating activities[10](index=10&type=chunk) [Strategic Update](index=3&type=section&id=6.%20Strategic%20Update) Valero is advancing an FCC Unit optimization project at its St. Charles Refinery, costing $230 million, to boost high-value product yield by 2026 - Valero is progressing with an FCC Unit optimization project at the St. Charles Refinery[13](index=13&type=chunk) - The project aims to increase the yield of high-value products[13](index=13&type=chunk) - The project is estimated to cost **$230 million** and is expected to be completed in **2026**[13](index=13&type=chunk) [Market Reference Prices and Differentials](index=18&type=section&id=7.%20Market%20Reference%20Prices%20and%20Differentials) Q2 2025 market reference prices for crude, natural gas, and product margins, along with renewable diesel and ethanol indicators, showed varied changes impacting profitability [Refining Market Data](index=18&type=section&id=7.1%20Refining%20Market%20Data) Q2 2025 saw lower crude oil prices, higher natural gas and RVO costs, and varied regional product margins impacting refining profitability Key Refining Market Prices (Q2 2025 vs Q2 2024) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change (%) | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------- | | Brent crude oil ($/barrel) | $66.59 | $84.96 | -21.62% | | WTI crude oil ($/barrel) | $63.87 | $80.74 | -20.90% | | Natural gas ($/million British thermal units) | $2.83 | $1.74 | 62.64% | | Renewable volume obligation (RVO) ($/barrel) | $6.14 | $3.39 | 81.12% | Selected Refining Product Margins (RVO adjusted, $/barrel) (Q2 2025 vs Q2 2024) | Region/Product | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change (%) | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------- | | U.S. Gulf Coast CBOB gasoline less Brent | $8.99 | $7.95 | 13.08% | | U.S. Gulf Coast ULS diesel less Brent | $14.79 | $14.12 | 4.74% | | North Atlantic CBOB gasoline less Brent | $13.43 | $16.22 | -17.20% | | U.S. West Coast California Reformulated Gasoline Blendstock for Oxygenate Blending 87 gasoline less Brent | $36.98 | $31.88 | 16.00% | [Renewable Diesel Market Data](index=19&type=section&id=7.2%20Renewable%20Diesel%20Market%20Data) Renewable Diesel markets in Q2 2025 saw lower ULS diesel prices, significantly higher RIN prices, stable LCFS credits, and increased feedstock costs Key Renewable Diesel Market Prices (Q2 2025 vs Q2 2024) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change (%) | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------- | | NYMEX ULS diesel ($/gallon) | $2.16 | $2.51 | -13.94% | | Biodiesel RIN ($/RIN) | $1.09 | $0.51 | 113.73% | | California LCFS carbon credit ($/metric ton) | $52.36 | $51.29 | 2.09% | | USGC used cooking oil ($/pound) | $0.56 | $0.42 | 33.33% | [Ethanol Market Data](index=19&type=section&id=7.3%20Ethanol%20Market%20Data) Q2 2025 ethanol market data indicated slightly higher corn prices and lower New York Harbor ethanol prices compared to the prior year Key Ethanol Market Prices (Q2 2025 vs Q2 2024) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change (%) | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------- | | Chicago Board of Trade corn ($/bushel) | $4.52 | $4.43 | 2.03% | | New York Harbor ethanol ($/gallon) | $1.84 | $1.90 | -3.16% | [Notes to Earnings Release Tables](index=22&type=section&id=8.%20Notes%20to%20Earnings%20Release%20Tables) This section defines and reconciles non-GAAP measures, detailing adjustments for impairment losses, project liabilities, and biofuel tax credits, and clarifies cash flow and capital investment calculations - Non-GAAP measures are used to assess ongoing financial performance by adjusting for items not indicative of core operating performance, such as asset impairment loss, project liability adjustment, and second-generation biofuel tax credit[62](index=62&type=chunk)[64](index=64&type=chunk)[67](index=67&type=chunk) - Key adjustments include a **$1.1 billion asset impairment loss** for the Benicia and Wilmington refineries (six months ended June 30, 2025), a project liability adjustment related to the Navigator carbon capture project cancellation (six months ended June 30, 2024), and a second-generation biofuel tax credit (three and six months ended June 30, 2024)[63](index=63&type=chunk)[64](index=64&type=chunk) - Adjusted net cash provided by operating activities excludes changes in current assets and liabilities and the other joint venture member's share of DGD's operating cash flow to more accurately reflect cash available to Valero[67](index=67&type=chunk)[68](index=68&type=chunk) - Capital investments attributable to Valero exclude the portion of DGD's capital investments attributable to the other joint venture member and capital expenditures of other consolidated variable interest entities (VIEs)[68](index=68&type=chunk)

Core Insights - The California Energy Commission is seeking buyers for Valero's Benicia refinery to prevent its closure in April 2026 [1] Group 1 - The Benicia refinery is at risk of shutting down if a buyer is not found [1] - The closure of the refinery could have significant implications for local fuel supply and prices [1] - The California Energy Commission's intervention highlights the importance of maintaining refining capacity in the state [1]

Core Viewpoint - Valero Energy (VLO) is expected to report a significant decline in quarterly earnings and revenues compared to the previous year, with analysts predicting earnings of $1.76 per share and revenues of $27.84 billion, reflecting decreases of 35.1% and 19.3% respectively [1]. Earnings Projections - The consensus EPS estimate for the quarter has been revised upward by 11.2% over the past 30 days, indicating a collective reassessment by analysts [2]. - Revisions to earnings projections are crucial for predicting investor behavior and are strongly correlated with short-term stock price performance [3]. Revenue Estimates - Analysts forecast 'Total operating revenues - Renewable diesel' to be $783.18 million, down 33.9% year-over-year [5]. - The estimate for 'Total operating revenues - Ethanol' is $1.10 billion, suggesting a decrease of 2% from the previous year [5]. - 'Total operating revenues - Refining' is expected to reach $26.94 billion, indicating an 18.5% decline from the prior-year quarter [5]. Refining Margins - The 'U.S. Mid-Continent region - Refining margin per barrel of throughput' is projected at $10.39, up from $9.73 in the same quarter last year [6]. - The 'U.S. West Coast region - Refining margin per barrel of throughput' is estimated at $16.18, compared to $14.86 in the previous year [6]. - The 'U.S. Gulf Coast region - Refining margin per barrel of throughput' is expected to be $10.80, slightly up from $10.36 year-over-year [7]. Throughput Volumes - 'Refining - Throughput volumes per day' is projected to be 2,797.77 thousand barrels, down from 3,010.00 thousand barrels in the previous year [7]. - The 'U.S. Gulf Coast region - Throughput volumes per day' is estimated at 1,787.60 thousand barrels, compared to 1,827.00 thousand barrels last year [8]. - The 'U.S. Mid-Continent region - Throughput volumes per day' is expected to be 399.23 thousand barrels, down from 438.00 thousand barrels year-over-year [9]. - The 'North Atlantic region - Throughput volumes per day' is projected at 334.68 thousand barrels, down from 469.00 thousand barrels in the previous year [10]. Stock Performance - Over the past month, Valero Energy shares have increased by 6.7%, outperforming the Zacks S&P 500 composite's increase of 5.9% [11].

Core Insights - The article emphasizes the importance of innovation and disruption in the financial sector, particularly focusing on high-tech and early growth companies as key areas for investment opportunities [1]. Group 1: Investment Focus - The company is keen on identifying growth buyouts and value stocks, indicating a strategic approach to investment that balances risk and potential returns [1]. - There is a strong emphasis on monitoring current events and major news within the industry to uncover potential investment opportunities [1]. Group 2: Research and Analysis - The company aims to provide comprehensive research that aids investors in making informed decisions, highlighting the significance of thorough analysis in the investment process [1].

Core Viewpoint - The market anticipates a year-over-year decline in Valero Energy's earnings due to lower revenues, with a focus on how actual results compare to estimates impacting stock price [1][2]. Earnings Expectations - Valero Energy is expected to report quarterly earnings of $1.76 per share, reflecting a year-over-year decrease of 35.1% [3]. - Revenues are projected to be $27.84 billion, down 19.3% from the same quarter last year [3]. Estimate Revisions - The consensus EPS estimate has been revised 3.01% higher in the last 30 days, indicating a reassessment by analysts [4]. - A positive Earnings ESP of +1.22% suggests analysts have recently become more optimistic about Valero's earnings prospects [12]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that a positive reading is a strong predictor of an earnings beat, especially when combined with a Zacks Rank of 1, 2, or 3 [10]. - Valero currently holds a Zacks Rank of 3, indicating a likelihood of beating the consensus EPS estimate [12]. Historical Performance - In the last reported quarter, Valero was expected to post earnings of $0.43 per share but delivered $0.89, resulting in a surprise of +106.98% [13]. - Over the past four quarters, Valero has beaten consensus EPS estimates three times [14]. Conclusion - Valero Energy is positioned as a compelling earnings-beat candidate, but investors should consider other factors influencing stock performance beyond earnings results [17].

Group 1 - Analyst has been writing on Seeking Alpha since 2018 and has over a decade of market experience [1] - Analyst has professional experience in private equity, real estate, and economic research [1] - Analyst possesses an academic background in financial econometrics, economic forecasting, and global monetary economics [1]

Company Overview - Valero Energy (VLO) shares increased by 3.4% to close at $148.67, with a notable trading volume compared to normal sessions, and a total gain of 12.1% over the past four weeks [1][2] Refining Sector Insights - The surge in Valero's stock is attributed to its strong position in the refining sector and an anticipated improvement in refining margins in the U.S. due to a decline in domestic refining capacity from the closure of major refineries [2] - Valero operates a robust network of refineries with a throughput capacity of 3.2 million barrels per day, positioning the company to benefit from rising refining margins [2] - The company's low-cost operations in refining allow it to maintain profitability across commodity cycles, further enhancing its growth potential [2] Renewable Energy Initiatives - Valero's involvement in producing renewable diesel and sustainable aviation fuels (SAF) positions it as a leader in the low-carbon fuels market, contributing to its growth drivers [2] Earnings Expectations - Valero is expected to report quarterly earnings of $1.75 per share, reflecting a year-over-year decline of 35.4%, with revenues projected at $27.93 billion, down 19% from the previous year [3] - The consensus EPS estimate for Valero has been revised 7.1% higher over the last 30 days, indicating a positive trend that typically correlates with stock price appreciation [4] Industry Context - Valero Energy is part of the Zacks Oil and Gas - Refining and Marketing industry, which includes other companies like World Kinect (WKC) [5] - World Kinect's consensus EPS estimate has changed by -6.1% over the past month, with a Zacks Rank of 5 (Strong Sell), contrasting with Valero's more favorable outlook [6]

Core Viewpoint - Valero Energy is expected to report a significant decline in earnings and revenue in its upcoming financial results, with analysts projecting a decrease in both metrics compared to the previous year [2][3]. Financial Performance - Valero Energy's earnings per share (EPS) for the upcoming quarter is projected to be $1.77, reflecting a 34.69% decrease from the same quarter last year [2]. - The anticipated revenue for the same quarter is $27.83 billion, indicating a 19.3% decline from the previous year [2]. - For the entire year, the Zacks Consensus Estimates forecast earnings of $6.19 per share and revenue of $115.9 billion, representing changes of -27% and -10.76%, respectively, compared to the previous year [3]. Analyst Estimates - Recent revisions in analyst estimates for Valero Energy suggest a positive outlook on the company's business operations and profit generation capabilities [3]. - The Zacks Consensus EPS estimate has shifted 1.79% upward over the past month, indicating some analyst optimism [5]. Valuation Metrics - Valero Energy has a Forward P/E ratio of 22.12, which is higher than its industry's Forward P/E of 17.86, suggesting a premium valuation [6]. - The company has a PEG ratio of 2.39, compared to the industry average PEG ratio of 1.58, indicating that the stock may be overvalued relative to its expected earnings growth [7]. Industry Context - The Oil and Gas - Refining and Marketing industry, which includes Valero Energy, currently holds a Zacks Industry Rank of 148, placing it in the bottom 40% of all industries [8].

Refining Operations - Valero has 15 refineries with a high-complexity throughput capacity of 3.2 million barrels per day[7] - Valero's refining segment adjusted EBITDA per barrel averaged $7.20 from 2015 to 2024[192] - Valero's global wholesale volumes reached 1.517 million barrels per day in 2024, representing 60% of total light products production[80] Low-Carbon Fuels - Valero has a renewable diesel production capacity of up to 1.2 billion gallons per year[8] - The Diamond Green Diesel (DGD) Port Arthur plant has the capability to upgrade approximately 235 million gallons per year of renewable diesel production capacity to sustainable aviation fuel (SAF)[8, 39] - Valero's ethanol plants have a combined production capacity of 1.7 billion gallons per year[9] Financial Performance and Capital Allocation - Valero's average payout ratio to stockholders has been 70% since 2014, or 58% excluding 2020[16] - Valero has reduced shares outstanding by over 38% since 2014[16] - Valero's cumulative EBITDA from renewable diesel reached $2.957 billion, with cumulative capital expenditures of $1.986 billion[34] - Valero targets a 20% to 30% net debt-to-capital ratio[47]