Valero's (VLO) Q4 Earnings & Revenues Beat Estimates

Valero Energy Corp (NYSE:VLO) posted fourth-quarter 2017 income of $1.16 per share, beating the Zacks Consensus Estimate of $1.05. Quarterly earnings improved from the year-ago quarter’s figure of 81 cents.

Total revenues grew 27.4% year over year to $26,392.0 million from $20,712.0 million. The figure surpassed the Zacks Consensus Estimate of $22,518.0 million.

Valero Energy Corporation Price, Consensus and EPS Surprise

Valero Energy Corporation Price, Consensus and EPS Surprise | Valero Energy Corporation Quote

Full-year 2017 adjusted earnings came in at $4.96, up 33.3% from the year-ago level of $3.72. The bottom line also beat the Zacks Consensus Estimate of $4.87. Revenues jumped 24.2% year over year to $93,980 million and outpaced the Zacks Consensus Estimate of $89,048 million.

Higher throughput margin owing to 96% throughput capacity utilization supported Valero Energy’s impressive fourth-quarter results.

Q4 Segmental Performance

Gross operating income in the Refining segment increased to $982 million from $645 million in the year-ago quarter, beating the Zacks Consensus Estimate of $884 million. The upside can be attributed to higher throughput margin owing to 96% throughput capacity utilization. Moreover, wider spreads between domestic sweet crude oil and Brent along with higher distillate and gasoline margins in most regions contributed to growth.

Ethanol gross operating income declined to $37 million from $126 million in the year-ago quarter and lagged the Zacks Consensus Estimate of $39 million. The downside was caused by lower ethanol prices.

Gross operating income from the VLP segment was $80 million compared with $70 million in the prior-year quarter and marginally missed the Zacks Consensus Estimate of $81 million. The increase was mainly due to new acquisitions made in the end of 2017. The acquired assets which boosted growth were Red River pipeline segment, the Port Arthur terminal assets and Parkway Pipeline.

Corporate and other segment reported gross expenses of $238 million compared with the year-earlier level of $208 million and came below the Zacks Consensus Estimate of $222 million.

Throughput Volumes

During the quarter, refining throughput volumes were approximately 3 million barrels per day, up from 2.85 million barrels per day in the year-earlier quarter and also increased from the Zacks Consensus Estimate of 2.9 million barrels per day.

By feedstock composition, sweet crude, medium/light sour crude and heavy sour crude accounted for 46.3%, 14.9% and 15.4%, respectively. The remaining volumes came from residuals, other feedstock as well as blendstocks and others.

The Gulf Coast accounted for approximately 48% of the total throughput volume. The Mid-Continent, North Atlantic and West Coast regions accounted for 14%, 13% and 6%, respectively.

Throughput Margins

Refining margin per barrel of throughput increased to $8.75 per barrel from the year-ago level of $7.82 per barrel but missed the Zacks Consensus Estimate of $9.5 per barrel.

Refining operating expense per barrel was $3.55 compared with $3.74 in the year-ago quarter. Depreciation and amortization expenses declined year over year to $1.60 a barrel from $1.62.

Capital Expenditure & Balance Sheet

Fourth-quarter capital expenditure totaled $641.0 million, including $142 million for turnarounds and catalyst expenditures. At the end of the quarter, the company had cash and temporary cash investments of $5.9 billion and debt of $8.9 billion. Valero Energy returned shareholders $727 million, of which $421 million was used to repurchase 5 million of its common stock and award shareholders with dividends worth $306 million.

Valero Energy’s 2017 capital expenditures totaled $2.4 billion. For 2018, Valero expects capital expenditures of $2.7 billion same as 2017 levels.

Q4 Price Performance

During the October-to-December quarter, Valero Energy gained 19.5% compared with the industry’s 15% rally.

Zacks Rank & Key Picks

Valero currently carries a Zacks Rank #3 (Hold). A few better-ranked players in the energy sector include Statoil (OL:STL) ASA (NYSE:STO) , Pioneer Natural Resources Company (NYSE:PXD) and Cabot Oil & Gas (NYSE:COG) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Statoil, based in Norway, is a major international integrated oil and gas company. It witnessed an average negative earnings surprise of 8.44% in the last four quarters.

Headquartered at Irving, TX, Pioneer Natural Resources Company is an independent oil and gas exploration and production company. The company delivered an average positive earnings surprise of 67.62% over the preceding four quarters.

Headquartered in Houston, TX, Cabot Oil & Gas, an independent oil and gas exploration company with producing properties mainly in the continental U.S., delivered an average negative earnings surprise of 0.11% over the trailing four quarters.

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