Valero Energy Corporation (VLO) Earnings & Analysis

Latest quarter

Valero reported third-quarter revenue of $46.1 billion, above the $37.4 billion consensus and up from $32.2 billion a year earlier. Adjusted earnings of $23.90 per share also exceeded the $21.28 consensus. Diluted earnings per share rose to $23.89 from $3.53 a year earlier.

In its filing, Valero attributed higher revenue primarily to increased prices for petroleum-based transportation fuels. It said higher gasoline and distillate margins lifted refining segment adjusted operating income, partly offset by lower throughput. The company reported refining operating income of $8.8 billion, compared with $1.6 billion a year earlier.

Valero said renewable diesel operating income increased as higher product prices outweighed higher feedstock costs. Ethanol operating income also rose, helped by clean fuel production credits and higher ethanol and co-product prices, partly offset by higher corn prices.

The company’s gross margin rose to 20.4% from 5.51%, while operating margin increased to 19.7% from 4.69%. Valero reported free cash flow of $7.0 billion, compared with $2.3 billion a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Lane Riggs said market volatility and tight product inventories continued through the third quarter, while Valero ran its refineries at near-record utilization. Looking ahead, he said low inventories, limited excess refining capacity and continued transportation-fuel demand supported the company’s refining outlook.

In the Q&A, Riggs said higher freight costs had affected heavy crude markets and widened discounts for Canadian crude on the Gulf Coast. He said Valero could shift between crude grades and was examining opportunities to increase its ability to process heavy sour crude.

Eric Honeyman discussed why renewable diesel margin capture changed between quarters. He said feedstock pricing lags and market volatility played a role, while a storm at DG 3 forced the business to use more foreign feedstocks that did not qualify for production tax credits. He said the business continued to see positive margins and cash flow in the fourth quarter, with efforts focused on maximizing domestic feedstock and vegetable oil use.

Riggs said the St. Charles refinery’s FCC optimization was completed during the quarter and had increased alkylate and gasoline production. He said Valero continued to evaluate other refining investments while retaining its investment process. Honeyman said the company was also pursuing incremental ethanol capacity and carbon sequestration projects intended to increase volumes and lower the fuel’s carbon intensity.

CFO Harminder Bhullar said Valero ended the quarter with $9.8 billion in cash and cash equivalents and $8.6 billion in debt. He said the company would keep cash above its long-term $4 billion to $5 billion target to preserve flexibility in a volatile market, while continuing to honor its payout commitment.

Guidance

On the latest call, CFO Harminder Bhullar said Valero expects approximately $1.1 billion in general and administrative expenses for 2026. On its second-quarter call, the company had expected approximately $960 million for the year.