Earnings Update: Valero Energy Corporation (NYSE:VLO) Just Reported Its Yearly Results And Analysts Are Updating Their Forecasts

As you might know, Valero Energy Corporation (NYSE:VLO) just kicked off its latest full-year results with some very strong numbers. It looks like a positive result overall, with revenues of US$65b beating forecasts by 2.4%. Statutory losses of US$3.50 per share were 2.4% smaller than the analysts expected, likely helped along by the higher revenues. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Valero Energy after the latest results.

Check out our latest analysis for Valero Energy

Taking into account the latest results, the consensus forecast from Valero Energy's 13 analysts is for revenues of US$78.0b in 2021, which would reflect a major 20% improvement in sales compared to the last 12 months. Per-share statutory losses are expected to explode, reaching US$0.76 per share. In the lead-up to this report, the analysts had been modelling revenues of US$76.4b and earnings per share (EPS) of US$0.99 in 2021. While they've upgraded their revenue numbers for next year, the consensus also expects losses to increase, perhaps due to the investments required to grow revenue. In any event, it's not clear that these new estimates are particularly bullish.

The consensus price target stayed unchanged at US$67.57, seeming to suggest that higher forecast losses are not expected to have a long term impact on the valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Valero Energy analyst has a price target of US$79.00 per share, while the most pessimistic values it at US$50.00. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's clear from the latest estimates that Valero Energy's rate of growth is expected to accelerate meaningfully, with the forecast 20% revenue growth noticeably faster than its historical growth of 4.1%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 11% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Valero Energy is expected to grow much faster than its industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Valero Energy dropped from profits to a loss next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Valero Energy. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Valero Energy going out to 2023, and you can see them free on our platform here..

It is also worth noting that we have found 4 warning signs for Valero Energy (1 is a bit unpleasant!) that you need to take into consideration.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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