Core Viewpoint - Valero Energy (VLO) has outperformed the struggling energy sector, with a stock increase of nearly 33% since the beginning of the year, benefiting from a focused operational strategy and favorable regulatory environment under the Trump administration [1]. Group 1: Stock Performance - VLO stock has recently experienced a decline, slipping more than 2% in the last five sessions and down about 5% over the past month [2]. - Despite the recent downturn, there are signs of improving sentiment in the derivatives market, indicating potential recovery [2][4]. Group 2: Options Market Sentiment - Throughout most of the month, options flow has been pessimistic, with net trade sentiment falling into negative territory, primarily driven by debit-based puts suggesting a downward bias [3]. - Recently, there has been a shift as more traders began buying calls, indicating a potential change in outlook among institutional investors [4]. - The initial negative sentiment in options flow for VLO stock is gradually turning around, which may lead to a positive shift in the open market [5]. Group 3: Trading Strategy Insights - Effective trading requires understanding the breaking point where bullish sentiment may turn into selling pressure, highlighting the importance of analyzing market sentiment [6].

Lawmakers in California at both the state and federal levels are warning that refinery closures could push prices higher while leaving the state more dependent on foreign oil. At the center of the warning is the planned shutdown of two major refineries: Valero’s Benicia facility and Phillips 66’s Los Angeles plant. Together, the closures would eliminate nearly 20% of California’s in-state refining capacity, according to Reps. Vince Fong and Stan Ellis, both Republicans from Bakersfield. Valero, which ha ...

Core Viewpoint - Valero Energy is experiencing a decline in stock performance, with a significant upcoming earnings report expected to show substantial year-over-year growth in earnings per share, despite a projected decline in revenue [2][3]. Group 1: Stock Performance - Valero Energy's stock closed at $162.82, reflecting a -3.03% change from the previous day's closing price, underperforming compared to the S&P 500's loss of 0.24% [1]. - Over the past month, Valero's shares have decreased by 5.89%, which is worse than the Oils-Energy sector's loss of 1.72% and the S&P 500's gain of 1.31% [1]. Group 2: Upcoming Earnings Report - Valero Energy is set to announce its earnings on January 29, 2026, with an expected earnings per share of $3.22, indicating a year-over-year growth of 403.13% [2]. - The consensus estimate for revenue is projected at $29.13 billion, representing a 5.28% decline compared to the same quarter last year [2]. Group 3: Annual Forecasts - For the entire year, the Zacks Consensus Estimates predict earnings of $10.07 per share and revenue of $121.45 billion, reflecting changes of +18.75% and -6.49%, respectively, from the previous year [3]. - Recent analyst estimate revisions suggest a positive outlook for Valero Energy's business and profitability [3][4]. Group 4: Valuation Metrics - Valero Energy currently has a Forward P/E ratio of 16.67, which is higher than the industry average of 14.05, indicating that it is trading at a premium [6]. - The company has a PEG ratio of 1.19, aligning with the industry average, which suggests that the stock's expected earnings growth rate is factored into its valuation [7]. Group 5: Industry Ranking - The Oil and Gas - Refining and Marketing industry, which includes Valero Energy, holds a Zacks Industry Rank of 85, placing it in the top 35% of over 250 industries [7][8]. - The Zacks Industry Rank indicates that the top-rated industries tend to outperform the lower-rated ones by a factor of 2 to 1 [8].

Core Viewpoint - Valero Energy's shares declined over 2% after Mizuho downgraded the company from Outperform to Neutral, setting a new price target of $192, citing concerns over valuation and refining margins [1][3] Company Summary - Mizuho highlighted Valero's above-peer valuation and the potential for weaker refining margins as primary reasons for the downgrade [1] - Despite the downgrade, Mizuho maintained a positive outlook on Valero's execution, integrated refining assets, and disciplined capital return strategy [1] - The refining outlook for 2026 appears less favorable, impacting Valero's stock performance [1][2] Industry Summary - Several global refining projects expected to launch by 2025 have been delayed to the first half of 2026, which may affect supply-demand dynamics and pressure refining margins [2] - Valero has shown strong year-to-date performance among large-cap refiners, but its significant exposure to the refining cycle could make it vulnerable to a softer macroeconomic environment [2]

Core Viewpoint - Valero Energy Corporation is set to release its financial and operational results for Q4 and full year 2025 on January 29, 2026, with a conference call scheduled for discussion [1] Company Overview - Valero Energy Corporation is a multinational manufacturer and marketer of petroleum-based and low-carbon liquid transportation fuels and petrochemical products, primarily selling in the U.S., Canada, the U.K., Ireland, and Latin America [2] - The company operates 15 petroleum refineries in the U.S., Canada, and the U.K., with a combined throughput capacity of approximately 3.2 million barrels per day [2] - Valero is a joint venture member in Diamond Green Diesel Holdings LLC, producing low-carbon fuels including renewable diesel and sustainable aviation fuel (SAF), with a production capacity of about 1.2 billion gallons per year in the U.S. Gulf Coast region [2] - The company owns 12 ethanol plants in the U.S. Mid-Continent region, with a combined production capacity of approximately 1.7 billion gallons per year [2] - Valero manages its operations through its Refining, Renewable Diesel, and Ethanol segments [2]

Core Insights - Valero Energy (VLO) shares have increased nearly 30% over the past year, indicating strong performance in the market [1] - The company has experienced a significant recovery in the refining macro environment following a challenging summer [1] Company Performance - Valero Energy's stock performance reflects a material recovery in the refining sector, which has positively impacted its financial standing [1] Market Environment - The refining macro environment has shown signs of recovery, contributing to Valero's stock gains and overall market performance [1]

Company Overview - Valero Energy Corporation (VLO) has a market cap of $55.1 billion and is a leading global manufacturer and marketer of petroleum-based and low-carbon transportation fuels, operating in North America, the U.K., Ireland, and Latin America [1] - The company operates refining, renewable diesel, and ethanol segments, producing a wide range of fuels and related products sold through wholesale markets and branded retail outlets [1][2] Stock Performance - VLO shares have decreased by 2.7% from their 52-week high of $185.62, but have increased by 18.8% over the past three months, outperforming the Energy Select Sector SPDR Fund (XLE), which rose over 1% in the same period [3] - Year-to-date, VLO stock is up 47.3%, significantly surpassing XLE's 6.6% gain, and has surged 29.8% over the past 52 weeks, while XLE has dropped by 4.4% [4] - The stock has been trading above its 50-day and 200-day moving averages since early May [4] Recent Financial Performance - On October 23, VLO shares jumped nearly 7% after the company reported a stronger-than-expected Q3 2025 adjusted EPS of $3.66 and beat revenue expectations with $32.17 billion [5] - The company reported a significant rebound in refining performance, with a 44% surge in refining margin per barrel to $13.14 and throughput utilization of 97% [5] Competitive Position - In comparison, rival Marathon Petroleum Corporation (MPC) has shown weaker performance, with MPC stock climbing 40.6% year-to-date and 25.6% over the past 52 weeks [6] - Analysts maintain a cautiously optimistic view on VLO, with a consensus rating of "Moderate Buy" from 20 analysts and a mean price target of $187.61, indicating a premium of 3.9% to current levels [6]

Core Insights - A competitive race is emerging among energy companies to construct a significant fuel pipeline to the U.S. West Coast, driven by the impending closure of two California refineries which may lead to soaring gasoline prices in the region [1] Industry Overview - Motorists in West Coast states have historically faced some of the highest fuel prices in the U.S. due to limited regional production and minimal connectivity to the Gulf Coast refining hub [2] - The closures of Phillips 66's Los Angeles plant and Valero Energy's Benicia refinery threaten to create a supply gap of nearly 280,000 barrels per day, presenting an opportunity for pipeline operators [3] Competitive Landscape - Three groups have proposed different projects to address the supply void created by the refinery closures, including HF Sinclair, ONEOK, and a partnership between Phillips 66 and Kinder Morgan [3] - The first group to finalize an investment decision may secure a multi-billion-dollar opportunity, as multiple pipelines could negatively impact each other's margins [4] Political Environment - The planned refinery closures have intensified pressure on California's Governor to prevent fuel price surges, potentially facilitating the approval of new fossil fuel projects in a state traditionally opposed to "Big Oil" [5] Financing and Capacity Commitments - Securing at least 70% of the proposed projects' capacity is crucial for financing, giving an advantage to the Phillips 66-Kinder Morgan project and HF Sinclair's proposal [6] - None of the proponents have announced any capacity commitments yet, and proposals that reuse existing lines may have a better chance of regulatory approval [7][8] Market Dynamics - Refining executives express skepticism about the construction of new pipelines, citing California's access to waterborne fuels as a more favorable option due to timing and transportation costs [9] - Valero Energy's COO indicated that the company is unlikely to enter long-term shipping arrangements with any of the proposed projects, favoring waterborne options for sourcing barrels globally [10][11]

Market Overview - The market is experiencing significant selling pressure despite the end of the government shutdown, indicating a "buy the rumor, sell the news" scenario [2][3] - There is a rotation in the market, with certain sectors like healthcare and industrials showing renewed strength while high-flying stocks are losing momentum as 2025 approaches [4][5] Stock Picks Thermo Fisher Scientific - This diagnostic research company has shown upward momentum, increasing by 38% over the last six months, and is expected to maintain this trend [8][7] - The suggested trade involves buying the stock and writing a call option for January, aiming to capture potential upside [15] Danaher Corporation - Danaher is also a diagnostics company that has shown resilience, with a nearly 10% increase in the last month, and is expected to continue its upward trajectory [17][15] - The trade example is a defined risk call spread to capture upside while managing risk in case of market weakness [16] Valero Energy - Valero, involved in oil and gas refining and renewable energy, has maintained upward momentum despite challenges in the broader energy sector, with a year-to-date increase of 48% [27][28] - The trade example is a risk reversal strategy, selling a 170 put and buying a 190 call for January, allowing for potential upside capture while providing a buffer against downside risk [35][36]

Core Insights - Zacks Premium provides tools for investors to enhance their stock market engagement and confidence [1] - The Zacks Style Scores are designed to complement the Zacks Rank, aiding in stock selection based on value, growth, and momentum [3][4][5][6][7] Zacks Style Scores - The Style Scores categorize stocks into four types: Value Score, Growth Score, Momentum Score, and VGM Score, each focusing on different investment strategies [4][5][6][7] - Value Score emphasizes identifying undervalued stocks using financial ratios [4] - Growth Score assesses a company's potential for long-term growth based on earnings and sales projections [5] - Momentum Score tracks price trends to identify favorable investment opportunities [6] - VGM Score combines all three styles to highlight stocks with the best overall characteristics [7] Zacks Rank - The Zacks Rank is a proprietary model that utilizes earnings estimate revisions to guide investors [8] - Stocks rated 1 (Strong Buy) have historically outperformed the S&P 500, with an average annual return of +23.93% since 1988 [8] - A large number of stocks are rated, with over 800 top-rated options available, making it essential to use Style Scores for better selection [9] Investment Strategy - For optimal returns, investors should focus on stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B [10] - Stocks with lower ranks but high Style Scores may still pose risks due to downward earnings forecasts [11] Company Spotlight: Valero Energy - Valero Energy Corporation is the largest independent refiner and marketer of petroleum products in the U.S., with a refining capacity of 3.1 million barrels per day [12] - Currently rated 3 (Hold) with a VGM Score of A, Valero has a Momentum Style Score of A and has seen a 10.3% increase in shares over the past four weeks [12][13] - Recent upward revisions in earnings estimates for fiscal 2025 indicate strong potential, with the Zacks Consensus Estimate rising by $1.23 to $9.21 per share [13]