Valero Energy (VLO -8.44%), a notable player in the oil and natural gas industry, recently released its results for the third quarter on Oct. 24, 2024. The report highlighted revenue of $32.9 billion, exceeding analysts' forecast of $31 billion, yet falling short of last year's $38.4 billion. Adjusted EPS also topped expectations at $1.14 versus an estimated $0.98, but represented a steep decrease from $7.49 in Q3 2023. Overall, despite facing decreased net income and operational challenges, Valero managed to outperform market expectations for both earnings and revenue.
| Metric | Q3 2024 Result | Q3 2024 Analysts' Estimate | Q3 2023 Result | % Change YoY |
|---|---|---|---|---|
| Total revenue | $32.9 billion | $31.04 billion | $38.4 billion | (14.3%) |
| Adjusted EPS | $1.14 | $0.98 | $7.49 | (84.8%) |
| Net income | $364 million | NA | $2.6 billion | (86.0%) |
Source: Analyst estimates for the quarter provided by FactSet.
Understanding Valero's Business Model
Valero Energy operates as an international manufacturer and marketer of transportation fuels and petrochemical products. Its operations include refining, ethanol production, and the marketing of these outputs.
The company has been focusing on streamlining its operations, specifically by optimizing its refining and renewable segments.
Third Quarter Highlights and Analysis
The third quarter presented several challenges for Valero, primarily in its refining and renewable diesel segments. The refining segment's operating income dropped to $565 million from $3.4 billion in the prior-year period. This decline was largely due to heavy maintenance activities that reduced throughput volumes to 2.9 million barrels per day, with the segment margin per barrel falling to $9.09 from $19.47.
The renewable diesel segment's operating income declined to $35 million, down from $123 million in the year-ago quarter. However, sales volumes improved by 18.4% year over year to 3.5 million gallons per day.
The ethanol segment's operating income of $153 million was down from Q3 2023's $197 million, but production volumes increased to 4.6 million gallons per day, which was 255,000 gallons per day higher than last year.
NYSE: VLO
Key Data Points
Notably, Valero completed the Diamond Green Diesel Port Arthur project, which will enhance its capability to produce sustainable aviation fuel (SAF). This marks a significant leap in its sustainability efforts.
In the quarter, Valero continued to prioritize shareholder returns with a $907 million distribution through a combination of ($342 million) dividends and stock buybacks ($565 million), representing 84% of adjusted net cash provided by operations.
Looking Forward
Valero is committed to maintaining a strong balance sheet as it navigates through fluctuating commodity cycles. With its strategic SAF project expected to commence operations soon, the company seeks to diversify its revenue streams and bolster its sustainability profile.
