Valero Energy is listed on the NYSE (New York Stock Exchange) under the ticker VLO, and shares are quoted in US dollars. Valero Energy, which operates a network of energy business units, is headquartered in San Antonio, Texas, United States of America
Show content
Hide article content
Background information about Valero Energy
Valero Energy is American oil company international activities in the energy industry in the territory different countries North America and Europe, the main direction of this business is oil refining, manages a network of gas stations selling fuel of its own production. The name of this organization comes from the name of the Catholic fortress Mision San Antonio de Valero (Mission San Antonio de Valero) built by the Spaniards in 1744 in the state of Texas to Christianize the local Indian population, today this object is a museum in the city of San Antonio .
Valero Energy products
Valero Energy's factories produce a variety of petroleum products, including a huge range of lubricants and automotive fuels, which the company sells at its own filling stations. Also this organization provides transportation of oil, controlling several pipelines mainly in North America.
Financial indicators and characteristics of the structure of Valero Energy Corporation
Today Valero Energy is an international energy corporation operating in the field of oil refining. Now the company employs about 10 thousand employees. Exemplary monetary equivalent of Valero Energy's assets is $45 billion, and its average annual profit is about $1 billion.
The history of the emergence and development of Valero Energy
Valero Energy was formed in 1981 after the division of the business of the American oil and gas corporation Coastal States Gas Corporation. Over the following years, Valero Energy rapidly developed and transformed into a large energy holding, the modern business structure of which was approved in 1997, then this organization completely concentrated on oil refining, selling its gas assets to other companies. A huge contribution to the development of the business of Valero Energy Corporation was made by the manager Joseph Gorder.
While publishing my next analytical review on world markets, I was already mentally thinking about the evening football match, but unexpectedly I got the task to search for an interesting and relevant investment idea in the oil and gas sector, which is now going through hard times.
However, after a long search, I was extremely interested in the largest oil refinery in the United States, Valero Energy. The company operates in three segments: oil refining, ethanol production and sales, and a fuel retail unit. I liked the fact that Valero Energy has great production facilities that cover all needs various types clients - both corporate and private, in connection with which it receives a stable cash flow.
No less important for me is the attitude of the management, which pursues a friendly policy towards investors, annually increasing dividend payments since 2000. Currently dividend yield is 3.6%, which is significantly higher than that of the main competitors.
In addition, in my opinion, the demand for petroleum products will continue to grow, especially given the annual increase in car sales in the US. In addition, Americans may once again switch to uneconomical cars due to the expected oversupply of "black gold" in the United States in the event that restrictions on oil and gas production are lifted.
Having studied financial statements company and calculated the main multiples, I came to the conclusion that Valero Energy, despite the leadership in its sector, is still undervalued relative to its key competitors and retains upside potential of 16%.
Valero Energy shares are part of our US strategy. Balanced. IIA, the uniqueness of which lies in the combination of shares listed on the US and Russian stock exchanges, which makes it available for IIA and, accordingly, for all investors, and not just those with the status of "qualified". The strategy is focused on obtaining a moderate income. When managing, first of all, on the basis of macroeconomic analysis, the optimal weights of various asset classes (stocks, bonds, commodities) in the portfolio are determined. Further, within each class based on fundamental analysis the most promising instruments are selected. Technical analysis plays a supporting role. A portfolio can include both ETFs and individual stocks.
Executive Summary
Valero Energy is the largest refinery in North America with a large production capacity to meet all the needs of different types of customers.
Valero Energy operates in three segments: oil refining, production and sale of ethanol. The third direction is retail, the company has more than 5 thousand filling stations.
Valero Energy's key strength is its investor-friendly management. The company annually increases dividend payments and conducts share buyback programs. The current dividend yield is 4.06%.
Another advantage of Valero Energy is its geographical location. So, 2 main oil refineries are located on the west coast between Los Angeles and San Diego, where more than 25 million people live.
Removal of restrictions on oil production in the United States may have a positive impact on financial indicators companies.
Despite being a leader in its sector, Valero Energy is still undervalued on all key multiples relative to its peers.
We assign sharesValero Energy recommendation "Buy" and set the target price at $77.
Basic information
Financial indicators, mln.$
Financial ratios, %
Brief description of the issuer
Valero Energy is the largest independent player in American market oil refining and retail fuel with a market capitalization of $30.7 billion. Engaged in the production and sale of petroleum products. Note that Valero Energy has 15 refineries with a total capacity of 3 million barrels of oil per day, 11 ethanol plants, a wind farm with a capacity of 50 megawatts, and more than 5,000 gas stations located in almost all states in the United States. The company operates in three segments: Refining, Ethanol and Retail. The Refining segment includes oil refining, wholesale distribution, product supply, and transport operations. The Ethanol segment is engaged in the production and sale of ethanol and grain distillates. The Retail segment includes filling stations and fuel sales. Valero Energy's main market for its products is the US, accounting for 70% of its total revenue, followed by the UK, which generates 11% of revenue, followed by Canada and other markets (8% and 11% respectively). As for segmentation, 96% of the total revenue comes from oil refining.
growth factors
Note that Valero Energy is the largest refinery in North America, with large production capacities that can cover all the needs of various types of customers, both corporate and private, and therefore has a stable cash flow. In addition, it is worth noting that the management of Valero Energy pursues a friendly policy towards investors, annually increasing dividend payments and conducting share buyback programs. In addition, Valero Energy increased capital expenditure by $1 billion, which will further improve the company's financial performance. The advantage for the company is the geographical location of facilities. So, 2 main oil refineries are located on the west coast between Los Angeles and San Diego, where more than 25 million people live, and the region is one of the largest in terms of fuel consumption.
It is also worth noting that Donald Trump promised to lift restrictions on oil and gas production, in connection with which an oversupply of oil is predicted in the United States. It is likely that oversupply in the oil market will negatively affect the dynamics of oil quotations, which, in turn, may encourage consumers to buy vehicles that are uneconomical in terms of fuel consumption. As a result, the demand for petroleum products could increase significantly, which will positively affect the financial performance of Valero Energy.
Financial results
Now consider the financial results of Valero Energy for the fourth quarter. Thus, the company's revenue reporting period increased by 10.3% to $20.71 billion, while analysts had forecast revenue of $17.42 billion. Operating profit of the ethanol division was $126 million due to high prices for this type of fuel, compared with a loss of $13 million in the year previously. Net profit increased by 23.15%, and amounted to $367 million or 81 cents per share. At the same time, adjusted earnings per share amounted to 81 cents, while analysts had forecast 77 cents per share. However, the report notes that overall profitability has declined due to higher biofuel production costs and the discount between domestic and global oil prices. In general, it should be noted that financial results surpassed all analysts' expectations.
| Indicator, mln$ | 4Q2016 | 4Q2015 | Change, y/y | 2016 | 2015 | Change y/y |
| Revenue | 20,712 | 18,777 | 10,31 | 75,659 | 87,804 | -13,83% |
| Cost price | -20,092 | -18,131 | 10,82 | -72,087 | -81,446 | -11,49% |
| Operating profit (EBIT) | 0,62 | 0,646 | -4,02 | 3,572 | 6,358 | -43,82% |
| Profit before taxes | 0,529 | 0,55 | 3,182 | 5,971 | -46,71 | |
| taxes | -0,113 | -0,155 | -0,765 | -1,87 | ||
| Net profit directed to shareholders | 0,367 | 0,298 | 23,15 | 2,289 | 3,99 | -42,63 |
Source - Thomson Reuters
Based on the dynamics since 2011, the company's revenue has been declining over the past few years due to low prices on oil, as well as the decline in oil production in the United States in the past few years. Nevertheless, the company's management managed to stabilize the situation by cutting costs and optimizing the business. In addition, over the past six months, US oil production has started to grow again due to an increase in the number of operating drilling rigs. It is also worth noting that analysts predicted revenue of $72.04 billion in 2016, but at the end of the year it exceeded their forecasts and amounted to $75.66 billion.
Evaluation of the company by metrics and comparison with competitors
In terms of comparative ratios, Valero Energy, despite being a leader in its sector, is still undervalued on all key metrics relative to its competitors.
Currently, Valero Energy's dividend yield is 4.06%, while the market average is 2.9%.
Technical analysis
From a technical point of view, on the monthly chart, Valero Energy stock quotes are trading in a long-term ascending channel, with its upper limit reaching $89, and the lower one passing around $56. At the same time, the shares are expected to renew their all-time high at $73.88. Stochastic lines have reached the overbought zone, so there is a temporary suspension of the upward movement.
Data source - Thomson Reuters
Based on the foregoing, we expect Valero Energy shares to medium term could go up to $77.
Maximum leverage
- MetaTrader4 & MetaTrader5: 1:20 (5% margin)
- On NetTradeX, equity CFD leverage equals trading account leverage (maximum 1:20)
8 stock exchanges, 400+ share CFDs
- We offer over 400 stock CFDs from 8 leading stock exchanges peace.
Commission
- From 0.1% of the transaction volume, but for US shares - $0.02 per share, for Canadian shares - 0.03 CAD per share. The commission is charged when opening and closing a position. When opening and closing trading position commission is charged from the account. For transactions with US shares (instruments named "#S-...") the fee is $0.02 per share, and for transactions with Canadian shares ('#CA-…') it is 0.03 CAD per share. For transactions with other shares, the commission is from 0.1% of the transaction volume.">
- For NetTradeX and MT4 minimum commission transaction is equal to 1 quote currency, except for Chinese shares min. com. 8 HKD, Japanese shares - 100 JPY and Canadian shares - 1.5 CAD. For MT5, the minimum commission is determined by the currency of the account balance - 1 USD/1EUR/100 JPY (only 1 USD for US stocks).
CFD Dividend Adjustment per Share = Dividend Per Share
- Holders of long (buy) CFD positions receive a dividend adjustment equal to the dividend payment. If at the time of the opening of trading on the day of the amendment payment (coincides with the ex-dividend date) the instrument is open long position, then a dividend adjustment is credited to the client account. On the contrary, if open short position, the dividend adjustment is deducted from the client's account.
Imagine that Alcoa Inc. declared a quarterly dividend in the amount of $0.03, the date of calculation of the dividend adjustment is 08.05.2014.If a trader had a long position of 1000 shares on the #S-AA instrument before the start of the American trading session 05/08/2014, then the amount of $30.00 ($0.03*1000) will be credited to his account.
If a trader had a short position, then $30.00 would be deducted from his account.
Dividends can be accrued in the form of share shares, as well as in a mixed form - a part in share shares plus a part in currency.At the same time, dividends in shares are converted into the currency according to current price stock.
From the accrued positive dividend adjustment, it is possible to withhold tax, as well as commission for the operation of accruing/writing off the adjustment.
"> - Detailed information on page "
site - a unique information portal that illuminates financial markets Kazakhstan, Russia, the world and all possible instruments of private investment. In modern market conditions anyone can become an investor and independently form their own investment portfolio. The site daily publishes news from the world of finance, analytics and forecasts of leading analysts, with which you can easily choose the desired investment strategy, and the site's analytical tools allow you to evaluate its profitability.
Ways of investing funds can be divided into collective and individual. Collective investment involves participation in a share investment fund under the management of one of the management companies, which takes over the management of the investment portfolio. Such investments are long-term and controlled risk. If you have the desire and excitement, you can try independent investment on stock market. In this case, the investment portfolio is formed at will and intuition. You can choose to trade on the stock market such instruments as stocks, bonds, currencies, gold and others precious metals, oil, tools derivatives market(futures, options) and much more, the main thing is to assess the risk, liquidity and possible profitability.
The investment strategy of a speculator is more risky, but it can bring a higher return on investments invested in financial instruments.
On the site site you will find all the necessary information for acceptance investment decisions and just to stay up to date in the exciting world of finance, business and investment.
All materials presented on the site are for informational purposes only and do not constitute an offer to sell or buy any securities, or an intention to provide any investment advice or services. All materials on this site are published on the basis of information that we believe to be reliable, but we do not claim that all information provided is absolutely accurate. We are not responsible for the use by visitors of the information contained on the site site, as well as for transactions with securities, somehow mentioned on the site. Investing in securities carries significant risk, and investors should conduct their own research into the reliability of issuers. Past returns are not indicative of future returns on investments.
