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Valero Energy (VLO) Q4 Earnings: Is a Surprise in Store?

Leading North American independent refiner and marketer of petroleum products, Valero Energy CorporationVLO is set to report fourth-quarter 2016 results on Jan 31, before the market opens.

The company surpassed the Zacks Consensus Estimate in three of the last four quarters with an average earnings beat of 13.06%. Let's see how things are shaping up prior to the announcement.

Factors to Consider

Among independent refiners, Valero Energy offers the most diversified refinery base with a capacity of 3 million barrels per day in its 15 refineries across the U.S., Canada and the Caribbean. We note that the company is best positioned to profit from increased refining margins, mainly due to its strategic refinery structure that enables it to use cheaper oil for more than half of its needs.

The company's price chart for the last three months shows significant strength. During the aforesaid period, Valero Energy gained almost 15% compared with only 9% improvement for the Zacks categorized Oil Refining & Marketing industry.

However, Valero Energy - the largest independent refiner in the country - remains exposed to the Brent-WTI spread, which was negative over a considerable portion of the fourth quarter. This may hurt the company's margin

Moreover, improvement in crude prices following OPEC's decision of production cut led to an increase in the input cost for refiners during the last month of the quarter.

Earnings Whispers

Our proven model does not conclusively show that Valero Energy is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Valero Energy currently has an Earnings ESP of -5.20% as the Most Accurate Estimate of 73 cents is lower than the Zacks Consensus Estimate of 77 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Valero Energy carries a Zacks Rank #3, which increases the predictive power. However, the company's negative Earnings ESP makes surprise prediction inconclusive.

Conversely, the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

Valero Energy Corporation Price and EPS Surprise

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

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Enable Midstream Partners LP ENBL has an Earnings ESP of +11.77% and Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Summit Midstream Partners, L.P. SMLP has an Earnings ESP of +76.47% and a Zacks Rank #3.

Plains All American Pipeline, L.P. PAA has an Earnings ESP of +26.53% and a Zacks Rank #2.

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Enable Midstream Partners, LP (ENBL): Free Stock Analysis Report

Valero Energy Corporation (VLO): Free Stock Analysis Report

Summit Midstream Partners, LP (SMLP): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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