Strength Seen in Valero Energy (VLO): Can Its 9.2% Jump Turn into More Strength?

Valero Energy (VLO) shares ended the last trading session 9.2% higher at $180.57. The jump came on an impressive volume with a higher-than-average number of shares changing hands in the session. This compares to the stock's 5.1% loss over the past four weeks.

The surge can be attributed to Valero Energy’s strong foothold in the refining sector and the recent geopolitical developments, which may open the door to Venezuela’s significant oil and gas reserves for U.S. refiners. Venezuelan crude is mainly heavy sour crude, which has a high sulfur content. This type of crude is particularly well-suited to produce diesel and heavier fuels. Valero Energy boasts a robust network of refineries with a throughput capacity of 3.2 million barrels per day. This also includes its advanced refineries along the U.S. Gulf Coast that specialize in processing a wide range of feedstocks, including heavy sour, medium/light sour and sweet crude. Given the high complexity of Valero’s Gulf Coast refineries, the company is well-positioned to process Venezuelan heavy sour crude efficiently and convert it into higher-value refined products, supporting margins and earnings if access to their crude oil increases.

This oil refiner is expected to post quarterly earnings of $3.10 per share in its upcoming report, which represents a year-over-year change of +384.4%. Revenues are expected to be $29.03 billion, down 5.6% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Valero Energy, the consensus EPS estimate for the quarter has been revised 5.8% lower over the last 30 days to the current level. And a negative trend in earnings estimate revisions doesn't usually translate into price appreciation. So, make sure to keep an eye on VLO going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Valero Energy belongs to the Zacks Oil and Gas - Refining and Marketing industry. Another stock from the same industry, PBF Energy (PBF), closed the last trading session 3.4% higher at $29.5. Over the past month, PBF has returned -14.6%.

For PBF Energy, the consensus EPS estimate for the upcoming report has changed -54.5% over the past month to -$0.47. This represents a change of +83.3% from what the company reported a year ago. PBF Energy currently has a Zacks Rank of #3 (Hold).

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This article originally published on Zacks Investment Research (zacks.com).

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