Valero Energy (VLO – Research Report), the Energy sector company, was revisited by a Wall Street analyst yesterday. Analyst Roger Read from Wells Fargo maintained a Hold rating on the stock and has a $184.00 price target.
Roger Read has given his Hold rating due to a combination of factors affecting Valero Energy’s market position and financial projections. The global refining market continues to be tight, which is generally favorable for Valero, yet the company faces near-term challenges such as seasonal fluctuations and narrower crude differentials that may pose modest headwinds. While Read’s Q2’24 EPS estimate remains unchanged at $4.98, it is significantly below the consensus, suggesting that there may be concerns about Valero’s short-term earnings potential. Furthermore, Valero’s guidance for Q2’24 reflects a mix of updated throughput and cost expectations alongside quarter-to-date indicators, which have been factored into the analysis.
Moreover, Read’s assessment considers the market outlook, including expectations for OPEC+ actions and margin environments for various fuel products. Despite the potential for improvement in distillate margins and tight refined product inventories supporting positive margins, there’s a degree of uncertainty in the market. On the positive side, Valero is expected to exceed its cash return to shareholders guidance, which could be a strong indicator of financial health. However, the unchanged forecast implies a conservative approach, with a payout of approximately 60% of Cash From Operations (CFFO). These factors, combined with a mixed outlook for 2024 and a more positive longer-term view, support the rationale behind Read’s Hold rating on Valero Energy’s stock.
VLO’s price has also changed moderately for the past six months – from $126.860 to $167.130, which is a 31.74% increase.
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Valero Energy (VLO) Company Description:
Founded in 1980, Texas-based Valero Energy Corp. manufactures and markets transportation fuels and other petrochemical products. The company operates through three business segments: Refining, Ethanol and Renewable Diesel.
