Valero Beats on Earnings, Misses on Revs - Analyst Blog

Valero Energy Corporation VLO posted adjusted first quarter 2014 income of $1.54 per share, beating the Zacks Consensus Estimate of $1.36 by 13.2%.

The quarterly earnings compare favorably with the year-ago adjusted earnings of $1.18 per share. This growth was bolstered by higher refining throughput margins in each of the company's regions, except the U.S. Mid-Continent.

Total revenue in the quarter increased 0.6% year over year to $33,663.0 million from $33,474.0 million but missed the Zacks Consensus Estimate of $35,293 million.

Throughput Volumes

During the quarter, refining throughput volumes were approximately 2.7 million barrels per day, up from the year-earlier level of 2.57 million barrels a day. This was primarily backed by major turnaround, maintenance and repair activity at refineries in Valero's U.S. Gulf Coast region, including the Texas City, Corpus Christi and Port Arthur refineries; and at its Benicia and Wilmington refineries in the U.S. West Coast region.

By feedstock composition, sweet crude, medium/light sour crude and heavy sour crude accounted for 39%, 19% and 18%, respectively. The remaining volumes came from residuals, other feedstock as well as blendstocks and others.

The Gulf Coast accounted for approximately 59% of the total volume. The Mid-Continent, North Atlantic and West Coast regions accounted for 15%, 17% and 9%, respectively.

Throughput Margins

Company-wide throughput margins increased to $10.90 per barrel from the year-ago level of $10.59 per barrel. The increase was buoyed by higher discounts for light sweet and sour crude oil.

Average throughput margin realized was $11.47 per barrel in the U.S. Gulf Coast (up from $10.00 per barrel in the year-earlier period), $12.60 per barrel in the U.S. Mid-Continent (down from $17.41), $9.47 per barrel in the North Atlantic (up from $8.45) and $7.24 per barrel in the U.S. West Coast (up from $6.26).

Total operating cost per barrel was $5.64 during the quarter, up 5.6% from the year-earlier figure of $5.34. Refining operating expenses per barrel were $4.00 versus $3.79 in the year-ago quarter. However, unit depreciation and amortization expenses increased 5.8% year over year to $1.64 per barrel.

Capital Expenditure & Balance Sheet

First quarter capital expenditure totaled $517.0 million, including $129 million for turnarounds and catalyst expenditures. At the end of the quarter, the company had cash and temporary cash investments of $3.6 billion. Valero also rewarded shareholders $133 million through dividends.

Valero maintained its total capital spending projection for 2014 at around $3 billion, including spending for turnarounds, catalyst expenditures as well as the retail segment. Majority of the capital is to be allocated to design logistics aimed at enhancing access to cost-advantaged crudes and increasing crude oil tankage.

Zacks Rank

The stock retains a Zacks Rank #3 (Hold). However, there are certain Zacks Ranked #1 (Strong Buy) stocks – Unit Corp UNT, Helmerich & Payne, Inc. HP and Boardwalk Pipeline Partners, LP BWP – that appear more rewarding in the short term.