VLO's Investment Appeal: Analyst Raises Price Target, Citing Advantaged Cost And Positive Market Indicators

Piper Sandler analyst Ryan M. Todd reiterated the Overweight rating on Valero Energy Corporation VLO, raising the price target to $171 from $168.

Todd writes that despite a reduction in EPS/EBITDA estimates, VLO's earnings power remains robust.

This robustness is attributed to the tightness in global capacity, supportive demand, and a structurally advantaged cost structure.

The company owns 15 refineries, 11 ethanol plants, and a 50% interest in a renewable diesel plant, notes the analyst.

Todd characterized the market by improving demand and low inventories, which are positive company performance indicators.

The analyst expects Valero Energy to accelerate the pace of buybacks during the 3Q.

The analyst thinks Valero Energy is an inexpensive valuation, making it an attractive option for investors.

Valero Energy's current margins suggest that there could be an upside to the 4Q Street estimates, Todd adds.

For FY24, the analyst raised the EPS estimate from $14.55 to $20.14.

On the negative side, Todd revised Q3 EPS/EBITDA estimates lower ($7.28sh/$4.182 billion EBITDA vs. $8.41sh/$4.715 billion EBITDA prior) driven primarily by net headwinds to refining capture and DGD margins.

The analyst also cautioned about headwinds from continued syncrude weakness, lower secondary product prices and weakness in Mayan diffs vs. WCS.

Price Action: VLO shares are trading lower by 4.79% to $131.57 on the last check Tuesday. 

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.