Company Overview - Valero Energy (VLO) closed at $128.97, reflecting a -0.15% change from the previous trading day, underperforming the S&P 500 which had a daily loss of 0.01% [1] - The stock has increased by 12.43% over the past month, outperforming the Oils-Energy sector's gain of 2.31% and the S&P 500's gain of 6.43% [1] Earnings Projections - The upcoming EPS for Valero Energy is projected at $2.54, indicating a 6.27% decline compared to the same quarter last year [2] - Quarterly revenue is estimated at $27.88 billion, down 19.16% from the previous year [2] - For the full year, earnings are projected at $6.08 per share and revenue at $115.97 billion, reflecting changes of -28.3% and -10.71% respectively from the prior year [3] Analyst Sentiment - Recent shifts in analyst projections for Valero Energy are important for investors, as positive revisions indicate optimism about the company's business and profitability [4] - The Zacks Consensus EPS estimate has decreased by 0.35% in the past month, and Valero Energy currently holds a Zacks Rank of 3 (Hold) [6] Valuation Metrics - Valero Energy has a Forward P/E ratio of 21.23, which is higher than the industry average Forward P/E of 16.76 [7] - The company has a PEG ratio of 2.29, compared to the industry average PEG ratio of 1.48 [8] Industry Context - The Oil and Gas - Refining and Marketing industry, which includes Valero Energy, has a Zacks Industry Rank of 139, placing it in the bottom 44% of over 250 industries [9] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [9]

Core Viewpoint - The Zacks Oil and Gas - Refining & Marketing industry is experiencing a paradox where strong fundamentals coexist with weak refining margins and market sentiment, primarily due to economic slowdown concerns and regulatory uncertainties [1][3][4]. Industry Overview - The industry includes companies that sell refined petroleum products and operate terminals, storage facilities, and transportation services, with refining margins being highly volatile and influenced by various factors such as inventory levels and capacity utilization [2]. Trends Defining the Industry's Future - Despite healthy demand for diesel and gasoline, refining margins have not met expectations, indicating a disconnect likely driven by macroeconomic concerns [3]. - The transition from the Blenders' Tax Credit to the Production Tax Credit has negatively impacted renewable diesel profitability, leading to reduced output and uncertainty regarding future recovery [4]. Long-Term Outlook - The refining industry is positioned for a favorable mid-cycle environment, supported by structural advantages in the U.S. market, including access to domestic crude and low-cost inputs [5]. - Marathon Petroleum anticipates continued global demand growth for refined products, despite upcoming capacity reductions in the U.S. and Europe [5]. Industry Performance - The Zacks Oil and Gas - Refining & Marketing industry ranks 139 out of 245 Zacks industries, placing it in the bottom 43% and indicating dull near-term prospects [6][7]. - The industry's earnings estimates for 2025 and 2026 have decreased by 38.3% and 19.7%, respectively, over the past year, reflecting a negative outlook [9]. Comparative Performance - Over the past year, the industry has underperformed compared to the broader Zacks Oil - Energy Sector and the S&P 500, with a decline of 16.9% versus an 8.2% decrease for the sector and a 12.5% gain for the S&P 500 [10]. Current Valuation - The industry is currently trading at an EV/EBITDA ratio of 3.76X, significantly lower than the S&P 500's 16.65X and the sector's 4.59X, indicating a potentially undervalued position [14]. Stocks in Focus - **Marathon Petroleum**: A leading independent refiner with a market cap of $48.7 billion, known for strong cash flow generation and shareholder returns, though shares have lost 9% in the past year [18][19]. - **Phillips 66**: Operates 13 refineries with a total capacity of 2.2 million barrels per day, shares have decreased by 19% in the past year [21][22]. - **Valero Energy**: The largest independent refiner in the U.S. with a capacity of 3.2 million barrels per day, shares have lost 18% in the past year [25][27]. - **Galp Energia**: A Portuguese firm with a market cap of $11.3 billion, shares have decreased by 25% in the past year [28][29].

Group 1 - IonQ, Inc. is considered "too speculative" and is losing significant money, according to Jim Cramer [1] - IonQ formed a strategic partnership with the Korea Institute of Science and Technology Information to advance South Korea's quantum technology goals [1] - Oklo Inc. is viewed as being "five years behind" GE Vernova, leading to a preference for GE Vernova over Oklo [1] Group 2 - Valero Energy reported first-quarter sales of $30.26 billion, exceeding analyst expectations of $28.68 billion [2] - Cramer prefers Phillips over Valero Energy, suggesting Valero has already seen too much growth [2] - Verona Pharma is described as a "rocket ship" but is also highly speculative due to significant losses and insider selling [2] Group 3 - Centrus Energy reported better-than-expected first-quarter revenue results [3] - Cramer advises caution regarding Centrus Energy, recommending GE Vernova instead [3] Group 4 - Valero Energy shares increased by 1.7% to $130.71 [4] - IONQ shares rose by 5.1% to $48.04 [4] - Verona Pharma shares gained 0.7% to $75.61 [4] - Centrus Energy shares surged by 12.9% to $127.86 [4] - Oklo shares jumped by 10.3% to $53.90 [4]

Group 1 - The oil market continues its strong performance, with WTI crude oil futures rising 2.8% to $63.67 per barrel and Brent crude oil futures increasing 2.6% to $66.63 per barrel, marking the largest four-day gain since October of the previous year [1] - The positive market sentiment is driven by a breakthrough in US-China trade negotiations, where both parties agreed to suspend new tariffs for 90 days, alleviating concerns over weak energy demand [1] - The US Labor Department reported a narrowing year-on-year increase in the Consumer Price Index (CPI) to 2.3%, the lowest in four years, which has led institutions like JPMorgan and Barclays to lower recession forecasts for the US economy [1] Group 2 - Geopolitical factors are also providing support, with the Trump administration adopting a hardline stance towards Iran, raising concerns about the stability of Middle Eastern supply [2] - Demand signals are turning positive, as a JPMorgan report indicates that despite uncertainties in crude oil demand, the refined oil market remains strong, with gasoline and diesel prices stable [2] - The refining sector is experiencing a bullish response in the secondary market, with companies like PBF Energy rising 10.1% and Delek US increasing by 6.1% [2]

Group 1 - Valero Energy's shares have underperformed over the past year, losing approximately 25% of their value due to a challenging refining macro environment [1] - The refining sector's conditions have been worse than anticipated, impacting Valero Energy's stock performance negatively [1] Group 2 - The article reflects a contrarian investment approach based on macro views and stock-specific turnaround stories to achieve significant returns with a favorable risk/reward profile [1]

Financial Data and Key Metrics Changes - For Q1 2025, the company reported a net loss of $595 million or $1.90 per share, compared to a net income of $1.2 billion or $3.75 per share in Q1 2024 [12] - Adjusted net income for Q1 2025 was $282 million or $0.89 per share, down from $1.3 billion or $3.84 per share in Q1 2024 [12] - The refining segment reported an operating loss of $530 million in Q1 2025, compared to an operating income of $1.7 billion in Q1 2024 [12] - Refining throughput volumes averaged 2.8 million barrels per day with a capacity utilization of 89% in Q1 2025 [13] Business Line Data and Key Metrics Changes - The Renewable Diesel segment reported an operating loss of $141 million in Q1 2025, down from an operating income of $190 million in Q1 2024 [13] - Ethanol segment operating income was $20 million in Q1 2025, compared to $10 million in Q1 2024 [13] - Ethanol production volumes averaged 4.5 million gallons per day in Q1 2025 [14] Market Data and Key Metrics Changes - U.S. light product demand showed a slight increase compared to last year, with product inventories below the same period last year [8] - Diesel sales volumes increased by 6% year-over-year, supported by higher agricultural demand [26] - Total light product demand globally increased by approximately 1 million barrels per day year-over-year [29] Company Strategy and Development Direction - The company is focused on operational excellence, capital deployment with a focus on returns, and maintaining shareholder returns [10] - A $230 million SEC unit optimization project is underway to increase the yield of high-value products, expected to start in 2026 [9] - The company anticipates tight product supply and demand balances, with low product inventories supporting refining fundamentals ahead of the driving season [10] Management Comments on Operating Environment and Future Outlook - Management noted that refining margins improved through the quarter despite a tough margin environment in the renewable diesel segment [7] - The company expects refining throughput volumes to fall within specific ranges for Q2 2025, with cash operating expenses projected at $5.15 per barrel [18][19] - Management expressed confidence in the resilience of the portfolio despite macroeconomic uncertainties [98] Other Important Information - The company returned $633 million to shareholders in Q1 2025, with a payout ratio of 73% [16] - The company ended the quarter with $8.5 billion in total debt and $4.6 billion in cash and cash equivalents, indicating a strong balance sheet [17] Q&A Session Summary Question: Market dynamics and crude differentials - Management noted that sales through the wholesale system were down a few percent, but product exports were up year-over-year [25] - Diesel sales were supported by higher agricultural demand, with total light product inventory drawing down to below the five-year average [30][31] Question: Guidance for Q2 and maintenance impacts - Management confirmed that lower guidance for Q2 is primarily due to maintenance activities, particularly in the North Atlantic and Mid Continent regions [48][49] Question: Decision to close the Peninsula refinery - Management explained that the decision was influenced by California's stringent regulatory environment and the higher costs associated with maintaining the facility [58] Question: Renewable diesel market normalization - Management indicated that the market is still adjusting to the new PTC regime, with expectations for improvement in the back half of the year [75] Question: Update on import permit in Mexico - Management confirmed the reinstatement of the import permit after demonstrating compliance with Mexican authorities [89][90] Question: Cash balance and share buybacks - Management emphasized the strength of the balance sheet and the commitment to returning cash to shareholders through buybacks [97] Question: Diesel inventory outlook - Management acknowledged the tight diesel inventory situation in the U.S. and the potential for increased volatility in the market [148]

Financial Data and Key Metrics Changes - For Q1 2025, the company reported a net loss of $595 million or $1.90 per share, compared to a net income of $1.2 billion or $3.75 per share in Q1 2024 [12] - Adjusted net income for Q1 2025 was $282 million or $0.89 per share, down from $1.3 billion or $3.84 per share in Q1 2024 [12] - The refining segment reported an operating loss of $530 million in Q1 2025, compared to an operating income of $1.7 billion in Q1 2024 [12] - Refining throughput averaged 2.8 million barrels per day with a capacity utilization of 89% [13] Business Line Data and Key Metrics Changes - The Renewable Diesel segment reported an operating loss of $141 million in Q1 2025, down from an operating income of $190 million in Q1 2024 [13] - Ethanol segment operating income was $20 million in Q1 2025, up from $10 million in Q1 2024 [13] - Renewable diesel sales volumes averaged 2.4 million gallons per day in Q1 2025 [13] Market Data and Key Metrics Changes - U.S. light product demand was slightly higher than last year, with product inventories below the same period last year [8] - Diesel sales showed a 6% year-over-year increase, supported by higher agricultural demand [26] - Total light product demand globally increased by approximately 1 million barrels per day year-over-year [29] Company Strategy and Development Direction - The company is focused on operational excellence, capital deployment with a focus on returns, and maintaining shareholder returns [10] - A $230 million SEC unit optimization project is underway to increase the yield of high-value products, expected to start in 2026 [9] - The company anticipates tight product supply and demand balances, with low product inventories supporting refining fundamentals ahead of the driving season [10] Management's Comments on Operating Environment and Future Outlook - Management noted a resilient economy despite macro uncertainties, with expectations of tight gasoline supply in California due to refinery closures [58][148] - The company expects refining cash operating expenses in Q2 2025 to be $5.15 per barrel [19] - Management expressed confidence in the ability to return cash to shareholders, with a commitment to share buybacks supported by a strong balance sheet [98] Other Important Information - The company returned $633 million to shareholders in Q1 2025, with a payout ratio of 73% [16] - The company ended Q1 2025 with $8.5 billion in total debt and $4.6 billion in cash and cash equivalents [17] - The company expects capital investments for 2025 to be approximately $2 billion, with $1.6 billion allocated to sustaining the business [18] Q&A Session Summary Question: Market dynamics and crude differentials - Management noted that sales through the wholesale system were down a few percent, but product exports were up year-over-year [25] - Diesel sales were supported by higher agricultural demand, with a year-over-year increase in gasoline sales of 1% [26] Question: Guidance for Q2 and maintenance impacts - Management confirmed that lower guidance for Q2 is primarily due to maintenance activities, particularly in the North Atlantic and Mid Continent regions [48][106] Question: Decision to close the Peninsula refinery - Management explained that stringent regulatory environments in California influenced the decision to close the refinery, with higher maintenance costs compared to Wilmington [58] Question: Renewable diesel market normalization - Management indicated that the market is adjusting to new PTC regulations, with expectations for improvement in the back half of the year [75] Question: Update on import permit in Mexico - Management confirmed the reinstatement of the import permit after demonstrating compliance with Mexican authorities [89] Question: Cash balance and share buybacks - Management emphasized the strength of the balance sheet and the commitment to returning cash to shareholders through buybacks [98] Question: Diesel inventory outlook - Management acknowledged that California may face gasoline shortages in the coming years, leading to potential volatility in margins [148]

Financial Performance - Valero reported a net loss attributable to stockholders of $595 million for Q1 2025, a decrease of $1.8 billion compared to a net income of $1.2 billion in Q1 2024[107]. - The operating income decreased by $2.6 billion, partially offset by a decrease in income tax expense of $618 million[109]. - Total revenues for Q1 2025 were $30.258 billion, down from $31.759 billion in Q1 2024, representing a decrease of approximately 4.7%[115][116]. - Revenues decreased by $1.5 billion in Q1 2025 to $30.258 billion from $31.759 billion in Q1 2024, primarily due to lower product prices in the Refining segment[121]. - Operating income fell by $2.579 billion, resulting in an operating loss of $900 million in Q1 2025 compared to an operating income of $1.679 billion in Q1 2024[121]. - Adjusted operating income decreased by $1.478 billion, from $1.713 billion in Q1 2024 to $235 million in Q1 2025[122]. - The effective tax rate increased to 29% in Q1 2025 from 21% in Q1 2024, primarily due to lower income before tax[123]. Segment Performance - The company's total operating income decreased by $2.6 billion in Q1 2025 compared to Q1 2024, with adjusted operating income down by $1.5 billion[110]. - The refining segment's adjusted operating income fell by $1.1 billion due to lower gasoline and distillate margins, a decline in crude oil differentials, and higher operating expenses[111]. - Renewable Diesel segment's operating income decreased by $331 million primarily due to reduced sales volumes and increased feedstock costs[111]. - Ethanol segment's adjusted operating income decreased by $19 million, impacted by higher corn prices and increased operating expenses, despite higher ethanol prices[111]. - Refining segment operating income decreased by $2.275 billion, resulting in an operating loss of $530 million in Q1 2025 compared to an operating income of $1.745 billion in Q1 2024[127]. - Renewable Diesel segment operating income decreased by $331 million, resulting in an operating loss of $141 million in Q1 2025 compared to an operating income of $190 million in Q1 2024[130]. - Ethanol operating income increased to $20 million in Q1 2025 from $10 million in Q1 2024, but adjusted operating income decreased by $19 million[135]. Cash Flow and Liquidity - Cash generated from operations during Q1 2025 was $952 million, with $660 million allocated to capital investments[108]. - As of March 31, 2025, Valero had $4.8 billion in cash, cash equivalents, and restricted cash, with total liquidity of $9.7 billion[108]. - Total liquidity as of March 31, 2025, was $9,747 million, consisting of $4,449 million in cash and cash equivalents and $5,298 million in available capacity from committed facilities[148]. - Cash flows from operating activities in Q1 2025 were $952 million, down from $1,846 million in Q1 2024, while cash used in investing activities was $(635) million[153]. - Capital investments for Q1 2025 totaled $660 million, slightly down from $661 million in Q1 2024, with capital investments attributable to Valero at $611 million compared to $619 million[167]. Debt and Financing - Valero issued $650 million of 5.150% Senior Notes due February 15, 2030 during Q1 2025[108]. - The company issued $650 million of 5.150% Senior Notes due February 15, 2030, with proceeds used for debt repayment and general corporate purposes[150]. - The company has a total fixed-rate debt of $8,558 million with an average interest rate of 4.9% as of March 31, 2025[178]. - The floating-rate debt amounts to $46 million with an average interest rate of 8.2%[178]. - A 10% increase or decrease in floating interest rates would not have a material effect on the company's results of operations[177]. Market and Operational Risks - The company is focused on managing risks associated with geopolitical tensions and regulatory changes affecting the industry[98]. - The company is exposed to market risks related to commodity price volatility and foreign currency exchange rates, with no material changes reported since the last annual report[180]. - Environmental regulations are becoming more complex and stringent, potentially increasing future costs and expenditures for the company[173]. - The company’s operations are subject to extensive environmental regulations, which may impact operational costs[173]. Future Outlook - Valero's future outlook includes expectations regarding refining segment margins and feedstock costs[96]. - Gasoline and diesel demand have exceeded pre-pandemic levels and are expected to follow typical seasonal patterns[113]. - The company anticipates that crude oil differentials will remain stable, but geopolitical factors may introduce volatility[113]. - Renewable diesel demand is expected to remain consistent with current levels, while ethanol demand is projected to follow typical seasonal patterns[113]. Asset Impairment - The company recognized an asset impairment loss of $1.1 billion ($877 million after taxes) related to operations in California[106]. - The company recognized a combined asset impairment loss of $1.1 billion in Q1 2025 due to the evaluation of assets at the Benicia and Wilmington refineries[138].

Core Viewpoint - Valero Energy Corporation (VLO) reported a significant adjusted loss in Q1 2025, contrasting sharply with prior earnings and consensus estimates, primarily due to asset impairments and declining refining margins [1][2]. Financial Performance - The adjusted loss for Q1 2025 was $1.90 per share, compared to earnings of $3.82 in the same quarter last year [1]. - Total revenues decreased from $31,759 million in the prior-year quarter to $30,258 million, although this figure exceeded the Zacks Consensus Estimate of $28,450 million [1]. - Adjusted operating income in the Refining segment fell to $605 million from $1.8 billion year-over-year, missing the estimate of $1,022 million [3]. - The Ethanol segment reported an adjusted operating profit of $20 million, down from $39 million in the prior-year quarter, also missing the estimate of $55.1 million [4]. - The Renewable Diesel segment experienced an operating loss of $141 million, a decline from an operating income of $190 million in the previous year [5]. Operational Metrics - Refining throughput volumes increased to 2,828 thousand barrels per day (MBbls/d) from 2,760 MBbls/d year-over-year, surpassing the estimate of 2,786 MBbls/d [6]. - The Gulf Coast region contributed 59.1% to total throughput volume, with Mid-Continent, North Atlantic, and West Coast regions accounting for 16%, 17.4%, and 7.5%, respectively [7]. Margins and Costs - The refining margin per barrel of throughput decreased to $9.78 from $14.07 in the prior year, while operating expenses per barrel rose to $5.07 from $4.71 [8]. - Total cost of sales slightly decreased to $29,751 million from $29,776 million year-over-year, attributed to lower material costs [9]. Capital Investment and Balance Sheet - Capital investment for Q1 totaled $660 million, with $582 million allocated for sustaining the business [10]. - As of March 31, 2025, the company had cash and cash equivalents of $4.6 billion, total debt of $8.5 billion, and finance lease obligations of $2.3 billion [11].

Core Insights - Valero Energy reported $30.26 billion in revenue for Q1 2025, a year-over-year decline of 4.7%, with an EPS of $0.89 compared to $3.82 a year ago, indicating a significant drop in profitability [1] - The revenue exceeded the Zacks Consensus Estimate by 6.36%, while the EPS surprised positively by 106.98% compared to the consensus estimate of $0.43 [1] Financial Performance - The refining margin per barrel in the U.S. Mid-Continent region was $7.87, below the average estimate of $8.98 [4] - In the U.S. West Coast region, the refining margin per barrel was $14.43, exceeding the average estimate of $11.51 [4] - The U.S. Gulf Coast region reported a refining margin of $9.56, above the average estimate of $8.87 [4] - Total throughput volumes per day were 2,828 thousand barrels, slightly above the estimated 2,824.11 thousand barrels [4] - Renewable diesel revenues were $900 million, significantly higher than the estimated $635.55 million, but down 36.2% year-over-year [4] - Ethanol revenues reached $1.23 billion, surpassing the estimated $997.56 million, reflecting an 11% year-over-year increase [4] - Refining revenues totaled $28.76 billion, compared to the estimated $27.22 billion, marking a 4.6% decline year-over-year [4] - Corporate and Eliminations reported -$626 million, better than the estimated -$840.47 million, with a year-over-year change of -30.5% [4] Stock Performance - Valero Energy's shares have returned -14.9% over the past month, compared to the Zacks S&P 500 composite's -5.1% change [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]