Energy

Valero Beats Estimates, Will Study Spin-Off of Retail Business

Valero Energy Corp. (NYSE: VLO) reported second-quarter earnings per share (EPS) of $1.50 on $34.66 billion in revenue this morning. EPS was up sharply from $1.31 in the same period a year ago, and revenue was up from $31.29 billion, a jump of 11%. The results compare to the Thomson Reuters consensus estimates for EPS of $1.43 and $32.62 billion in revenue.

The refiner and ethanol producer raised its guidance on capital spending from $3.5 billion to $3.6 billion, which the company said was due to bringing forward some projects originally scheduled for completion next year. Capital spending in 2013 is expected to fall to $2.0 billion $2.5 billion as a result.

The company’s chairman and CEO noted:

Our goal continues to be the creation of long-term shareholder value combined with maintaining our investment-grade credit rating.

To that end, Valero plans to seek a tax-efficient spin-off of its retail operations:

After careful consideration, we believe a separation of our retail business from the remainder of Valero by way of a tax-efficient distribution will create operational flexibility within the businesses and unlock value for our shareholders. As independent companies, both retail and the remaining business will be better-positioned to focus on their industry-specific strategies.

Valero’s operating income from its ethanol segment fell from $64 million in the second quarter of 2011 to just $5 million this year, due primarily “lower gross margins as excess industry ethanol inventories held margins at low levels.” The company has idled at least three of its ethanol plants as a result. Operating income rose slightly, from $1.3 billion to $1.4 billion, on higher throughput margins and an increase of 342,000 barrels a day of throughput, due mainly to the addition of two European refineries.

Shares are up nearly 5.5% in premarket trading at $27.50 in a 52-week range of $16.40 to $28.68. Thomson Reuters had a consensus analyst price target of $34.71 before today’s results were announced.

Paul Ausick

Essential Tips for Investing (Sponsored)

A financial advisor can help you understand the advantages and disadvantages of investment properties. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Investing in real estate can diversify your portfolio. But expanding your horizons may add additional costs. If you’re an investor looking to minimize expenses, consider checking out online brokerages. They often offer low investment fees, helping you maximize your profit.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.