Q: Is it finally safe to buy Valero?
A: Valero (VLO) has been one of the rare energy stocks that investors haven’t absolutely hated. But it’s hard to make a case investors should love it, either.
The oil refiner’s stock has been a relative winner in the battered energy sector for a number of reasons, including its peer-beating ability to drive profitability from investors’ capital. Shares of the company have been essentially flat over the past 12 months though Monday, which is an impressive feat given how badly the rest of the energy sector has done both in terms of stock-price action and profitability.
But Valero showed Tuesday that while it might be top of the class in the energy sector, there’s still plenty of pain. The company reported 67% lower adjusted profit per share of 60 cents, which was nearly 8% lower than analysts expected, according to S&P Global Market Intelligence. Shares fell Tuesday 3.7%, or $2.19, to $57.63. Stewart Glickman, stock analyst at S&P Global, cut his “strong buy” rating to “buy” and cut his 12-month price target on the stock 18% to $67 a share. Analysts are still bullish on Valero, saying the stock could be worth 30% more in 18 months than they are now. But the profit declines aren’t over. Adjusted profit in 2016 is expected to drop by a third.
USA TODAY markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com or on Twitter @mattkrantz.
