Goldman Sachs analyst Neil Mehta upgraded Valero Energy Corp (NYSE:VLO) from Neutral to Buy rating with a price forecast of $154.
The analyst believes current consensus expectations better reflect concerns about oil product demand and tighter crude differentials.
The analyst estimates EPS to grow from around $7.50 this year to over $12.50 in 2027.
The bullish stance reflects share repurchases, limited refining capacity increases, and improving crude differentials from the returning OPEC+ supply.
While a hard landing for oil demand and the economy is a key risk, the analyst notes positive developments in China-U.S. trade relations as highlighted by GS Economics Research.
Also, Valero offers unique advantages such as lowest production cost, Gulf Coast exposure with a perceived crude/product advantage and ongoing capital returns supported by a near $5 billion cash balance, adds the analyst.
The analyst raised EPS estimates to $7.49 for 2025, $11.46 for 2026 and $12.67 for 2027, from the previous projections of $6.33, $9.84, and $11.30, respectively.
The analyst’s 2025 and 2026 EPS estimates are 12% and 10% above FactSet consensus, respectively.
Mehta is increasing the estimates to account for the strengthening underlying factors and now believes consensus estimates are unlikely to be revised downwards.
VLO Price Action: VLO shares are up 4.42% at $136.26 at publication on Tuesday.
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