On Tuesday, Valero Energy Corporation’s (NYSE:VLO) stock rating received an upgrade from Goldman Sachs, moving from Neutral to Buy. The investment firm also increased the price target on Valero shares to $154, marking a significant rise from the previous target of $127. The upgrade comes as Valero’s stock has shown strong momentum, posting an 11.5% return in the past week alone. According to InvestingPro data, the stock is currently trading at $130.49, with analysis suggesting it remains undervalued despite recent gains.
Goldman Sachs analysts, led by Neil Mehta, provided a positive outlook on Valero’s earnings potential, projecting an increase in EPS from approximately $7.50 this year to over $12.50 by 2027. This growth is anticipated to be driven by a mix of share repurchases, limited refining capacity additions, and improving crude differentials due to the return of OPEC+ supply. The firm’s EPS estimates for Valero are 12% and 10% above the FactSet consensus for the years 2025 and 2026, respectively. As a prominent player in the Oil, Gas & Consumable Fuels industry, Valero has maintained dividend payments for 37 consecutive years, currently offering a 3.46% yield.
While acknowledging the potential risks of a "hard landing" scenario for oil demand and the broader economy, the analysts cited the latest insights from the Goldman Sachs Economics Research team, which discussed positive developments in China-US trade relations. This information contributed to the more optimistic stance on the stock. InvestingPro analysis reveals that Valero maintains strong financial health with a current ratio of 1.56, indicating liquid assets well exceed short-term obligations.
The investment firm highlighted several unique factors that make Valero an attractive investment, including the company’s position as the producer with the lowest cost, its exposure to the Gulf Coast, where there is believed to be a crude/product advantage, and the ongoing capital returns supported by a current cash balance near $5 billion.
Valero Energy Corporation, with its upgraded status and new price target, is positioned by Goldman Sachs as a company with strong potential for growth and a robust strategy for delivering shareholder value in the coming years.
In other recent news, Valero Energy Corporation reported a net loss of $595 million for the first quarter of 2025, with earnings per share (EPS) of -$1.90, significantly missing the forecasted EPS of $0.80. However, the company’s revenue exceeded expectations, reaching $30.26 billion, surpassing the forecast of $28.84 billion. On the analyst front, Goldman Sachs upgraded Valero’s stock rating from Sell to Neutral, citing a reassessment of the refining sector and Valero’s financial position, and increased the price target to $127.00. Meanwhile, Raymond James adjusted its price target for Valero Energy to $150.00 from $155.00 but maintained a Strong Buy rating, highlighting the company’s potential in the refining sector and growth in renewable diesel markets. Additionally, Valero’s recent stockholders’ meeting saw the retirement of director Robert A. Profusek and the re-election of non-employee directors. These developments are part of Valero’s ongoing efforts to navigate the complex energy landscape, focusing on shareholder returns and strategic positioning.
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