Valero Energy (VLO) Moves 3.4% Higher: Will This Strength Last?

Valero Energy (VLO) shares soared 3.4% in the last trading session to close at $148.67. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 12.1% gain over the past four weeks.

The surge can be attributed to Valero Energy’s strong foothold in the refining sector and an expected improvement in refining margins in the United States. A decline in domestic refining capacity, driven by the closure of major refineries such as Phillips 66’s Los Angeles facility and Valero’s Benicia refinery, is anticipated to drive refining margins higher. Valero Energy boasts a robust network of refineries with a throughput capacity of 3.2 million barrels per day. As such, the company is well-positioned to benefit from rising refining margins. Furthermore, its low-cost operations in the refining segment enable it to maintain profitability across commodity cycles. Additionally, Valero’s involvement in the production of renewable diesel and sustainable aviation fuels (SAF) should position it as a front-runner in the low-carbon fuels market. The company’s low-cost operations and a positive outlook on refining margins have been key growth drivers. 

This oil refiner is expected to post quarterly earnings of $1.75 per share in its upcoming report, which represents a year-over-year change of -35.4%. Revenues are expected to be $27.93 billion, down 19% 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 7.1% higher over the last 30 days to the current level. And a positive trend in earnings estimate revision usually translates 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 is part of the Zacks Oil and Gas - Refining and Marketing industry. World Kinect (WKC), another stock in the same industry, closed the last trading session 0.7% higher at $29.49. WKC has returned 4.4% in the past month.

For World Kinect, the consensus EPS estimate for the upcoming report has changed -6.1% over the past month to $0.55. This represents a change of +14.6% from what the company reported a year ago. World Kinect currently has a Zacks Rank of #5 (Strong Sell).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research