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1. Company Snapshot

1.a. Company Description

Valero Energy Corporation manufactures, markets, and sells transportation fuels and petrochemical products in the United States, Canada, the United Kingdom, Ireland, and internationally.The company operates through three segments: Refining, Renewable Diesel, and Ethanol.It produces conventional, premium, and reformulated gasolines; gasoline meeting the specifications of the California Air Resources Board (CARB); diesel fuels, and low-sulfur and ultra-low-sulfur diesel fuels; CARB diesel; other distillates; jet fuels; blendstocks; and asphalts, petrochemicals, lubricants, and other refined petroleum products, as well as sells lube oils and natural gas liquids.


As of December 31, 2021, the company owned 15 petroleum refineries with a combined throughput capacity of approximately 3.2 million barrels per day; and 12 ethanol plants with a combined ethanol production capacity of approximately 1.6 billion gallons per year.It sells its refined products through wholesale rack and bulk markets; and through approximately 7,000 outlets under the Valero, Beacon, Diamond Shamrock, Shamrock, Ultramar, and Texaco brands.The company also produces and sells ethanol, dry distiller grains, syrup, and inedible corn oil primarily to animal feed customers.


In addition, it owns and operates crude oil and refined petroleum products pipelines, terminals, tanks, marine docks, truck rack bays, and other logistics assets; and owns and operates a plant that processes animal fats, used cooking oils, and inedible distillers corn oils into renewable diesel.The company was formerly known as Valero Refining and Marketing Company and changed its name to Valero Energy Corporation in August 1997.Valero Energy Corporation was founded in 1980 and is headquartered in San Antonio, Texas.

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1.b. Last Insights on VLO

Valero Energy Corporation's recent performance was driven by strong refining margins, with crack spreads rising significantly since September 2024. The company's Q3 earnings beat, with $3.66 per share, exceeded consensus forecasts. Valero returned $1.3 billion to shareholders via dividends and buybacks, a positive event that reduces outstanding shares. Improving crack spreads and a profitable renewable diesel market are expected to drive strong results. Analysts expect significant improvement in valuation as weaker quarters fall off the trailing twelve-month metric. (Source: Zacks Consensus Estimate)

1.c. Company Highlights

2. Valero Energy Corp. Beats Expectations with Strong Q3 Earnings

Valero Energy Corp. reported strong financial results for the third quarter of 2025, with adjusted net income of $1.1 billion or $3.66 per share, surpassing estimates of $3.05 per share. The Refining segment reported $1.6 billion of operating income, with refining throughput volumes averaging 3.1 million barrels per day or 97% throughput capacity utilization. The company's cash flow was impacted by the timing of Production Tax Credit (PTC) payments and other factors, but there are no substantial tax issues.

Publication Date: Oct -24

📋 Highlights
  • Net Income Surge:: Q3 2025 net income rose to $1.1B ($3.53/share) vs. $364M ($1.14/share) in Q3 2024.
  • Refining Segment Performance:: Generated $1.6B operating income with 3.1M barrels/day throughput (97% capacity utilization).
  • Shareholder Returns:: Returned $1.3B to stockholders via $351M dividends and $931M buybacks (5.7M shares repurchased).
  • Capital Allocation:: 2025 capital investments set at $1.9B, with 18% debt-to-capital ratio reflecting strong liquidity.
  • Ethanol Growth Drivers:: Record production and rising global demand, including Brazil/India shifting to E30 and Canada adopting E15.

Segment Performance

The Refining segment's strong performance was driven by high utilization rates and favorable refining margins. The Ethanol segment achieved record production and solid earnings, driven by growing demand and limited supply. The company's Renewable Diesel (RD) segment saw improved margins due to lower feedstock prices, with DGD margins returning to positive EBITDA.

Operational Highlights

The company attributes its strong throughput performance to its focus on reliability and maintenance over the past decade. Valero is cautiously optimistic about the potential benefits of AI and machine learning applications to further improve availability. The company is also exploring the use of robotic automation to improve efficiency and inspect equipment.

Outlook and Guidance

For the fourth quarter, Refining throughput volumes are expected to be between 1.78 million and 1.83 million barrels per day for the Gulf Coast. The company expects capital investments of approximately $1.9 billion for 2025. Analysts estimate next year's revenue growth at -4.9%. The company's guidance suggests a continued strong performance in the Refining segment, driven by favorable trends in crude differentials and product cracks.

Valuation

Valero's current valuation metrics indicate a P/E Ratio of 70.36, EV/EBITDA of 13.94, and a Dividend Yield of 2.59%. The stock's high P/E ratio suggests that the market has already priced in the company's strong operational performance and growth prospects. The EV/EBITDA ratio, on the other hand, suggests that the company's enterprise value is reasonable relative to its earnings before interest, taxes, depreciation, and amortization.

Challenges Ahead

The company faces challenges in 2026, including the phase-out of the Production Tax Credit (PTC) on foreign feedstocks and SAF. However, the company expects the Renewable Volume Obligation (RVO) to be net positive for renewables. The current D4 RIN price is $3.3 billion, and the company expects it may need to rise by $0.25-$0.30 to incentivize marginal producers.

3. NewsRoom

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Valero Energy: Valuation Reflects Improved Macro (Rating Downgrade)

Dec -04

Source: seekingalpha.com

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Valero Energy Corporation $VLO Shares Sold by Advisors Asset Management Inc.

Nov -26

Source: defenseworld.net

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Barings LLC Has $2.68 Million Holdings in Valero Energy Corporation $VLO

Nov -23

Source: defenseworld.net

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Market Today: Nvidia (NVDA) Whipsaw, Walmart (WMT) Beats; Fed Cut Odds Fade

Nov -20

Source: gurufocus.com

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First Look: Nvidia beats, Walmart lifts outlook, Gemini 3 debuts

Nov -20

Source: gurufocus.com

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Arvest Bank Trust Division Sells 51,746 Shares of Valero Energy Corporation $VLO

Nov -15

Source: defenseworld.net

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Eli Lilly Leads Three Stocks Near Buy Points

Nov -14

Source: investors.com

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Goldman Sachs Says US Stocks Could Lag for 10 Years: 5 Strong Buy Value Dividend Ideas

Nov -13

Source: 247wallst.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.84%)

6. Segments

Refining (Incl. VLP and Excl. Renewable Diesel)

Expected Growth: 4.6%

Growing demand for transportation fuels, increasing global refining capacity, and Valero Energy Corporation's strategic positioning drive the refining segment's growth.

Renewable Diesel

Expected Growth: 10.0%

Growing demand for low-carbon fuels, increasing adoption of renewable energy sources, and government incentives drive the growth of Valero Energy Corporation's renewable diesel segment.

Ethanol

Expected Growth: 4.8%

Growing demand for low-carbon fuels and increasing adoption of ethanol blending in the transportation sector drive Valero's ethanol segment growth, supported by its strong production capabilities and established customer relationships.

Corporate and Eliminations

Expected Growth: 3.7%

Valero's Corporate and Eliminations segment is expected to grow, driven by increasing overhead costs, improving operating efficiency, and strategic investments, which will contribute to the company's overall profitability.

7. Detailed Products

Refined Products

Valero Energy Corporation refines crude oil into various petroleum products, including gasoline, diesel fuel, jet fuel, and petrochemicals.

Ethanol

Valero Energy Corporation produces ethanol, a biofuel used as a gasoline additive to increase octane and reduce emissions.

Renewable Diesel

Valero Energy Corporation produces renewable diesel, a low-carbon, high-performance diesel fuel made from renewable resources.

Petrochemicals

Valero Energy Corporation produces petrochemicals, including ethylene, propylene, and butadiene, used in the production of plastics, fibers, and other materials.

Lubricants

Valero Energy Corporation produces lubricants, including motor oils, transmission fluids, and industrial lubricants.

Asphalt

Valero Energy Corporation produces asphalt, a petroleum-based product used in road construction and maintenance.

8. Valero Energy Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Valero Energy Corporation faces moderate threat from substitutes due to the availability of alternative energy sources such as solar, wind, and hydroelectric power. However, the high cost of switching to these alternatives and the lack of infrastructure to support widespread adoption mitigate this threat.

Bargaining Power Of Customers

Valero Energy Corporation's customers have low bargaining power due to the lack of concentration in the market and the high switching costs associated with changing energy providers.

Bargaining Power Of Suppliers

Valero Energy Corporation's suppliers have moderate bargaining power due to the presence of a few large suppliers of crude oil and refined products. However, the company's large scale of operations and diversified supply chain mitigate this power.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the energy industry, including the need for significant capital investments and regulatory approvals.

Intensity Of Rivalry

The intensity of rivalry in the energy industry is high due to the presence of several large players, including ExxonMobil, Chevron, and ConocoPhillips, which leads to intense competition for market share and pricing power.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 27.09%
Debt Cost 6.22%
Equity Weight 72.91%
Equity Cost 11.59%
WACC 10.13%
Leverage 37.15%

11. Quality Control: Valero Energy Corporation passed 8 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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A-Score: 6.0/10

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

174.14$

Current Price

174.14$

Potential

-0.00%

Expected Cash-Flows