Valero Energy Corporation (NYSE:VLO) — Shares of VLO stock rallied 2.7% on Thursday, as oil reversed and closed 4.3% higher on the day.
Following the announcement of better-than-expected Q2 results in late July from the world’s largest independent petroleum refiner and marketer, S&P Capital IQ Equity Research reiterated its “Buy” rating and 12-month target of $58 for VLO stock. Its analyst noted Valero exported a record amount of gasoline in the quarter.
Capital IQ said Valero should be a chief beneficiary of increasing oil production in North American shale plays and Canadian oil sands, since most of this oil travels through the middle of the country to the Gulf Coast where Valero is the largest refiner. Higher global gasoline demand should also be a positive for the company.
While the consensus estimate is for full-year earnings to decline 65% to $3.34 per share, analysts look for a recovery to $5.17 per share in 2017, which would represent a 60% year-over-year increase.
Turning to the chart, we see very high accumulation of VLO stock in July. This above-average buying took shares from their low under $50, where they formed a deep “V” bottom, and pushed them higher, penetrating the 50-day moving average at $52. The MACD indicator remained positive during most of July, confirming that a major turn had occurred.
On Thursday, the rally continued as higher-than-average volume pushed VLO stock to a close slightly above its intermediate bearish resistance line at $54. The stock’s next resistance is at its 200-day moving average at $61.
Traders should look to buy VLO stock under $55 with a target of $65 for a potential return of at least 18%. Investors may want to purchase shares at the market price for both growth and income.
Valero Energy pays an annual dividend of $2.40 per share for a forward yield of 4.4%. Capital IQ said it expects the company to boost its dividend in 2017 as earnings turn higher again.