Valero (VLO) Q1 Earnings Miss Estimates, Revenues Beat

Valero Energy Corporation (NYSE:VLO) posted adjusted first-quarter 2016 earnings of 60 cents per share that lagged the Zacks Consensus Estimate of 73 cents by 17.8%.

The earnings also decreased from the year-ago adjusted income of $1.87 per share. The bottom-line deterioration was due to lower refining throughput margins in each of the company’s regions.

Total revenue in the quarter surpassed the Zacks Consensus Estimate of $10.81 billion but plunged 26.3% year over year to $15.71 billion from $21.33 billion.

Throughput Volumes

During the quarter, refining throughput volumes were 2.9 million barrels per day, marginally higher than the year-earlier level of 2.73 million barrels per day. This was primarily due to less maintenance activities during the quarter.

By feedstock composition, sweet crude, medium/light sour crude and heavy sour crude accounted for 41%, 18% and 15%, respectively. Residuals, other feedstock as well as blendstocks and others made up for the remaining volume.

The Gulf Coast accounted for about 59% of the total volume, while the Mid-Continent, North Atlantic and West Coast regions accounted for 16%, 16% and 9%, respectively.

Throughput Margins

Company-wide throughput margins decreased to $7.96 per barrel from the year-ago level of $12.39 per barrel.

Average throughput margin realized in the U.S. Gulf Coast was $8.03 per barrel as against $11.98 per barrel in the year-earlier period, in the U.S. Mid-Continent was $6.95 per barrel compared with $13.82 a year ago, in the North Atlantic was $7.94 per barrel as against $12.45 last year, and in the U.S. West Coast was $9.34 per barrel compared with $12.33 in the previous year.

Total operating cost per barrel was $5.31 during the quarter, down 6.2% from the prior-year figure of $5.66. Refining operating expenses per barrel were $3.55 as against $3.95 in the year-ago quarter. However, unit depreciation and amortization expenses increased 2.9% year over year to $1.76 per barrel.

Capital Expenditure and Balance Sheet

First-quarter capital expenditure totaled $479.0 million, which included $161 million for turnarounds and catalyst expenditures. At the end of the quarter, the company had cash and temporary cash equivalents of $3.8 billion. Valero also rewarded shareholders $282 million through dividends and repurchased 3.8 million shares for $265 million.

Valero expects its total capital spending projection for 2016 at around $2.6 billion, which includes spending for turnarounds, catalyst expenditures as well as expenses for the retail segment. About $1.6 billion of the above-mentioned capital spending is apportioned for stay-in-business capital and the other $1.1 billion is for growth investments.

Zacks Rank and Stocks to Consider

Valero holds a Zacks Rank #3 (Hold). Some better-ranked players from the same space include ReneSola Ltd. (NYSE:SOL) , FutureFuel Corp. (NYSE:FF) and Braskem S.A. (NYSE:BAK) . All these sport a Zacks Rank #1 (Strong Buy).