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A Sum-Of-The-Parts Valuation Leads Barclays To View Valero As Inexpensive

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A Sum-Of-The-Parts Valuation Leads Barclays To View Valero As Inexpensive

Close on heels of the release of Valero Energy Corporation (NYSE: VLO)'s quarterly results, Barclays said the results will have a positive impact in the near term. Notwithstanding the potential upside, the firm believes the shares are inexpensive based on its sum-of-the-parts analysis and price/tangible book value, as well as relative yield to the S&P.

Paul Cheng, analyst at Barclays, said the second-quarter earnings outperformance relative to his estimate and the consensus estimate will trigger a relief rally, with the anticipated gains premised on the relief that the worst did not materialize despite the negativity surrounding the shares and the sector.

Related Link: Vetr Downgrades Valero To 4 Stars

The firm commended the company's ability to generate $2.3 billion in free cash flow from operations and buy back $400 million worth of shares during the quarter. However, the firm sees a let up in the pace of stock buybacks through the end of the year.

Barclays also lowered its 2016 capital expenditure estimate to $2.5 billion from $2.6 billion, given the current run rate of $1.9 billion.

According to the firm, the fair value of Valero is in the lows $70s per share, while the stock is currently trading at $51.74, roughly 35 percent, plus, upside. The firm has an Overweight rating and a $73 price target for the shares of Valero.

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Latest Ratings for VLO

DateFirmActionFromTo
Apr 2019MaintainsOverweightOverweight
Mar 2019UpgradesPeer PerformOutperform
Jan 2019UpgradesSellNeutral

View More Analyst Ratings for VLO
View the Latest Analyst Ratings

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