Valero Energy Corporation (NYSE:VLO) — This is the world’s largest independent refiner and marketer of petroleum, and it recently spun off its retail business.
In the first quarter, the company reported EPS of $1.87, beating the consensus estimate by $0.20. Average refinery throughput volume increased by 9,000 barrels per day year over year to 2.7 million. VLO’s refineries averaged 92% utilization in Q1, and profit margins widened by $1.49 per barrel.
According to S&P Capital IQ, a migration of crude oil inventories to the Gulf Coast from the Midcontinent sets the company up for increased exports of refined products since Valero has high exposure to the Gulf region.
Its analysts raised their 2015 EPS estimate by $0.26 to $6.77 per share and their 2016 estimate by $1.22 to $6.57. They also raised their 12-month price target for VLO stock to $74, which is based on just six times projected EV/EBITDA, and have a “strong buy” rating on shares.
Technically VLO stock has been consolidating in a rectangle pattern that began in January following a break from $51 to the mid-$60s in February. The midpoint of the consolidation is the 50-day moving average at $59.64, with support at the bottom of the rectangle at $57.
A break above $62.50 should result in a trade to $70. Supporting a breakout is a dramatic decline in sellers, as well as a strong MACD indicator. Long-term investors would be wise to buy VLO stock at this discounted level for representation in the oil and gas sector with a very low forward P/E of less than 10 and annual dividend yield of 2.6%.
