U.S. refining company, Valero Energy Corporation (VLO) is expected to report second-quarter 2014 earnings on Jul 30, before the opening bell.
In the preceding three-month period, Valero delivered an average positive earnings surprise of 13.24%. Notably, financial results in the last reported quarter marked the company’s third earnings beat in the last four quarters, driven by higher refining throughput margins in each of the company’s regions, except the U.S. Mid-Continent. Let’s see how things are shaping up for this announcement.
Factors to Consider This Quarter
Valero is expected to post higher second-quarter 2014 income than the year-ago quarter. However, the profit would be lower than street expectations mainly due to seasonal weakness in its biggest Gulf Coast market.
For the second quarter of 2014, Valero Energy has estimated income from continuing operations of $1.10 to $1.25 per share, while the Zacks Consensus Estimate is $1.20.
Owing to higher throughput volumes as well as increased discounts on sour crude oil and certain types of North American light crude oil, the company’s refining segment operating income is expected to rise in the to-be-reported quarter on a year-over-year basis. However, the refining segment’s operating income will likely be partially offset by weaker year-over-year gasoline and distillate margins in most regions.
Moreover, the ethanol segment’s operating income is anticipated to be higher in the second quarter of 2014 from the prior-year quarter mainly due to increased gross margins.
The company is also projected to post a loss of $63 million or 12 cents per share from discontinued operations owing to a non-cash charge related to its Aruba refinery.
Earnings Whispers?
Our proven model does not conclusively show that Valero is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen. Unfortunately, this is not the case here, as elaborated below.
Zacks ESP: Valero’s earnings ESP is 0.00%, as the Most Accurate estimate and the Zacks Consensus Estimate both stand at $1.20.
Zacks Rank: Though Valero’s Zacks Rank #3 (Hold) increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some energy firms you may want to consider on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter:
Mid-Con Energy Partners L.P. (MCEP) has an Earnings ESP of +8.89% and a Zacks Rank #1 (Strong Buy).
Newfield Exploration Co. (NFX) has an Earnings ESP of +1.96% and a Zacks Rank #1.
Whiting Petroleum Corp. (WLL) has an Earnings ESP of +3.18% and a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment