Valero (VLO) Raised to Buy: Should It be in Your Portfolio?

A generic image of a stock chart
Credit: Shutterstock photo

On Oct 17, ValeroEnergy CorporationVLO was raised to a Zacks Rank #2 (Buy).

Why the Upgrade?

Over the last 30 days, the Zacks Consensus Estimate for third-quarter 2017 earnings has been revised upward to $1.75 from the prior estimate of $1.65. Also, for full-year 2017, the Zacks Consensus Estimate for earnings has been raised to $4.71 from $4.47 over the same time frame.

The company's balance sheet looks strong, reflecting steadily increasing cash balance since 2015. Also, the current debt load contracted over the same time frame. Valero's operations are not significantly dependent on debt as reflected by its debt-to-capitalization ratio of 0.58%, significantly below 28.54% of the industry .

The company has been returning cash to shareholders on a regular basis. During second- quarter 2017, Valero returned $658 million to stockholders through dividend payments and share buybacks. Also, Valero's dividend yield of 3.6% is impressive and higher than 3.1% of the industry.

Given that gasoline prices have been low as compared to the mid-2014 level following persistent crude weakness, the demand for refined products has been healthy. Also, record September auto sales will likely drive demand for gasoline. According to Autodata Corp, the seasonally adjusted annual sales rate for all U.S. light vehicles touched 18.57 million units last month, up from 16.14 million in the prior month. It also marked the highest sales rate since July 2005.

Following healthy gasoline demand, the Zacks Consensus Estimate for the company's third-quarter 2017 profit from the refining segment came in at $1,372 million, higher than $959 million in the preceding quarter and $1,280 million in the year-ago quarter.

Valero's pricing chart looks impressive. Year to date, the company has rallied 13.6%, outperforming the 2% gain of the industry.

Other Stocks to Consider

Other top-ranked players in the energy sector are Par Pacific Holdings Inc. PARR , Jones Energy, Inc. JONE and Tesoro Corporation ANDV . Par Pacific and Jones Energy sport a Zacks Rank #1 (Strong Buy) while Tesoro carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.

Headquartered in Houston, TX, Par Pacific managed to beat the Zacks Consensus Estimate in three of the last four quarters, at average earnings surprise of 195.26%.

Based in Austin, TX, Jones Energy is an upstream energy player. The company's 2017 earnings are estimated to grow 31.6%.

Tesoro, based in San Antonio, TX, is involved in the refining and marketing of petroleum products. The company surpassed the Zacks Consensus Estimate in the prior four quarters with average positive earnings surprise of 40.70%.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Valero Energy Corporation (VLO): Free Stock Analysis Report

Par Pacific Holdings, Inc. (PARR): Free Stock Analysis Report

Jones Energy, Inc. (JONE): Free Stock Analysis Report

Tesoro Corporation (ANDV): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

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.

In This Story


Other Topics


Latest Markets Videos


Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at

Learn More