Valero Energy Corp. (NYSE: VLO) - Q1 2011 Earnings Preview
Monday, April 25, 2011 2:40 PM

Valero Energy Corp. (NYSE: VLO) is expected to report its fiscal 2011 first-quarter financial results on Tuesday, April 26, 2011. During the first three quarters of fiscal 2010, VLO's reported earnings per share exceeded analysts' consensus estimates by margins ranging from 6.3 percent to 40 percent. The last quarter of 2010, however, was a different story as VLO missed the target by 5.9 percent.

Analysts have estimated the average EPS of $0.46 for the first quarter of fiscal 2011. The average revenue estimate for the quarter has been increased to $22.21 billion from $19.64 billion in the prior year's period. This is an estimated increase of approximately 13.10 percent. In the last 52 weeks, the stock has been trading in the range of $15.49 to $31.12. The target price of the stock is estimated between the range of $23 and $41 with the mean target price of $32.08.

Valero Energy Corporation was created on Jan. 1, 1980, as the corporate successor to LoVaca Gathering Company, a subsidiary of the Coastal States Gas Corporation. Valero Energy Corporation is an international manufacturer and marketer of transportation fuels, other petrochemical products and power. Its assets include 14 petroleum refineries with a combined throughput capacity of approximately 2.6 million barrels per day, 10 ethanol plants with a combined production capacity of 1.1 billion gallons per year, and a 50-megawatt wind farm. Valero is also one of the largest retail operators with approximately 5,800 retail and branded wholesale outlets in the United States, Canada and the Caribbean under the Valero, Diamond Shamrock, Shamrock, Ultramar and Beacon brands. Based in San Antonio, Valero is a Fortune 500 company with approximately 20,000 employees. Valero also operates a 33-turbine wind farm near its McKee Refinery in Sunray, Texas

VLO reported income from continuing operations of $180 million, or $0.32 per share, for the fourth quarter of 2010, compared with a loss from continuing operations of $131 million, or $0.23 per share, for the fourth quarter of 2009. For the year ended December 31, 2010, the company reported income from continuing operations of $923 million, or $1.62 per share, compared with a full-year 2009 loss from continuing operations of $273 million, or $0.50 per share. Regarding cash flows in the fourth quarter of 2010, capital spending was $629 million, of which $125 million was for turnaround and catalyst expenditures. Also in the fourth quarter, the company paid $28 million in common stock dividends and received $877 million in proceeds from the sale of the Paulsboro refinery and the company's interest in the Cameron Highway Oil Pipeline Company. In addition, the company issued $300 million in tax-exempt bonds and ended the fourth quarter with $3.3 billion in cash and temporary cash investments.

During the quarter, the company announced plans to expand the crude unit capacity of its McKee refinery by 25,000 barrels per day. The refinery will process West Texas intermediate crude oil from Midland to feed the increased charge rate. The expansion project, which will take place over the next three years, will increase the amount of crude oil available to be processed at the McKee refinery to 195,000 bpd. The expansion plans follow the previously announced Panhandle crude gathering system expansion project, which is nearing completion. That project involves looping an existing pipeline from Valero's storage facility in Perryton, Texas, as well as building additional pump stations and storage facilities to bring more locally produced crude to the McKee refinery.

On March 11, 2011, VLO agreed to acquire Chevron's Pembroke refinery in Wales, U.K., as well as extensive marketing and logistics assets throughout the United Kingdom and Ireland, for $730 million, excluding working capital. Based on current market prices, working capital has an estimated value of $1 billion, although the final value for working capital will be determined at closing. The company expects to fund the transaction from available cash, and the transaction is expected to close in the third quarter of 2011, subject to regulatory approvals.



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