On Thursday, Citi updated its stance on Valero Energy (NYSE:VLO) shares, increasing the price target to $192.00 from $160.00 and maintaining a Buy rating. The adjustment follows a reassessment of Valero's financial model in light of the latest commodity prices.
Valero has recently completed an extensive maintenance period in the first quarter, which is expected to position the company advantageously for the upcoming summer driving season.
The analyst from Citi noted that despite Valero's impressive year-to-date stock performance, with a 29% increase, the market did not significantly react to the company's substantial earnings per share (EPS) beat in the fourth quarter. Additionally, due to the high level of maintenance activity this quarter, the potential for a sharp price reaction to the first quarter earnings report is considered low.
For the first quarter, Citi has set an EPS forecast of $3.12 for Valero, which is on the lower end of the consensus range of $3.07 to $3.46 that has been established since April. The rationale behind the price target upgrade to $192 per share is attributed to higher product margins, an increase in the modeled buybacks, and a reduced forecast for general and administrative expenses.
The revised price target by Citi reflects a positive outlook for Valero Energy as it gears up for what could be a robust summer driving season. The company's strategic maintenance efforts in the first quarter are seen as a preparatory step to capitalize on this seasonal opportunity.
InvestingPro Insights
With Citi raising the price target for Valero Energy (NYSE:VLO), the latest data from InvestingPro further enriches the outlook for the company. Valero's management has been proactive in repurchasing shares, signaling confidence in the company's value, as indicated by one of the InvestingPro Tips. The market seems to agree, with Valero's stock showing a strong return over the last three months, as well as a significant price uptick over the last six months.
InvestingPro Data indicates a robust market capitalization of $55.11 billion and an attractive P/E ratio of 6.26 for the last twelve months as of Q4 2023. This is complemented by the company's notable return on assets of 14.75% during the same period. Additionally, Valero has maintained dividend payments for an impressive 36 consecutive years, with a current dividend yield of 2.56%. These metrics underscore the company's financial stability and appeal to income-focused investors.
For those looking to delve deeper into Valero's potential, InvestingPro offers additional insights. There are 14 more InvestingPro Tips available that can provide a more comprehensive understanding of Valero's financial health and market position. Interested readers can take advantage of these insights and use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enhancing their investment strategy with real-time data and expert analysis.
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