Here's Why Retain Strategy is Apt for Valero Energy Stock Now

Valero Energy Corporation VLO is a premier oil refining company and hasn’t witnessed any earnings estimate revisions for the June quarter of 2025 over the past seven days.

What’s Favoring VLO?

Valero, currently carrying a Zacks Rank #3 (Hold), is a best-in-class oil refiner involved in the production of fuels and products that can meet the demands of modern life. Its refineries are located across the United States, Canada and the U.K. A total of 15 petroleum refineries, wherein Valero has ownership interests, have a combined throughput capacity of 3.2 million barrels per day. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.    

Valero demonstrated robust capital return discipline, maintaining a payout ratio of 73% in the March quarter of 2025. The company returned $633 million to shareholders, including $277 million in stock repurchases and a 6% dividend hike. This signals management's confidence in financial resilience and prioritization of shareholder value, even in a challenging margin environment.

Moreover, VLO ended the first quarter of 2025 with $4.6 billion in cash, $5.3 billion in liquidity (excluding cash), and a net debt-to-capitalization of 19%. This provides the leading refiner with considerable financial flexibility, thereby enabling investment in optimization projects and continued returns to shareholders without compromising financial health.

Risks to VLO’s Business

However, despite tight inventories and strong diesel and gasoline demand, VLO’s refining margins remain subdued. Management has attributed this to macroeconomic uncertainty and speculative bearishness rather than fundamentals.

Moreover, as a premium refiner, the firm’s input costs are highly fluctuating, given the volatile pricing scenario of crude oil. Some other companies that have refining businesses and are likely to get exposed to volatility in oil prices are Marathon Petroleum Corp. MPC, Phillips 66 PSX and Exxon Mobil Corporation XOM.

Marathon Petroleum, with its extensive refining operations, manages the largest refining system in the United States. MPC is also banking on its midstream business, thanks to increasing throughput volumes.

PSX boasts a diversified business model, with substantial involvement in refining midstream, chemicals and marketing & specialties. Across all its operations, Phillips 66 maintains a strong presence in terms of safety, profitability, scale and competitive advantages.

ExxonMobil also has a strong presence in the global refining business, with approximately 5 million barrels per day of distillation capacity across its 21 refineries. XOM hasn’t witnessed any earnings estimate revisions for the June quarter of 2025 over the past seven days.

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

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