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VALERO ENERGY CORP/TX (VLO)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered revenue of $30.756B and GAAP EPS of $0.88; adjusted EPS was $0.64 as refining margins normalized and West Coast operations were pressured by maintenance and cost headwinds .
  • Wall Street S&P Global consensus was unavailable; secondary sources showed adjusted EPS forecasts ranging $0.07–$0.43 and revenue ~$30.20–$30.36B; Valero’s $0.64 adjusted EPS and $30.756B revenue represented beats versus these indications, though non-SPGI data vary; treat as indicative only .
  • Segment performance was mixed: Renewable Diesel operating income doubled YoY to $170M on margin and inventory optimization tailwinds; Refining profit fell sharply to $437M amid weaker cracks; Ethanol dropped to $20M .
  • 2025 guidance calls for ~$$1.95B capital investments attributable to Valero, Q1 refining throughput ranges by region, RD opex of $0.51/gal, and G&A ~$985M; dividend raised to $1.13 per share in January, reinforcing capital returns as a core catalyst .

What Went Well and What Went Wrong

What Went Well

  • Renewable Diesel outperformed, with operating income of $170M and margin per gallon of $1.06; management noted a “one-time benefit with some inventory optimization” boosting Q4 results .
  • Heavy sour crude processing hit record levels; optimization away from resid feedstocks and the Port Arthur coker supported higher heavy runs, demonstrating system flexibility .
  • Strategic execution: DGD’s SAF project successfully started and is fully operational, providing optionality to upgrade ~50% of capacity to SAF, aligning with premium markets in EU/UK .
    • “2024 was our best year for personnel and process safety and one of our best years for environmental performance” — Lane Riggs .

What Went Wrong

  • Refining profitability compressed: segment operating income declined to $437M (vs. $1.6B prior year), with adjusted refining op income per barrel at $1.60 vs. $5.72 YoY as cracks normalized and co-products pressured capture .
  • West Coast was a drag, posting an operating loss of $(140)M; maintenance at Benicia constrained transportation fuel output and capture .
  • Ethanol margins weakened materially: adjusted operating income per gallon fell to $0.05 vs. $0.49 YoY amid high inventories and sustained production, despite record production volumes .

Financial Results

Consolidated P&L vs prior periods and indicative estimates

MetricQ2 2024Q3 2024Q4 2024YoY (Q4)vs Est (indicative)
Revenues ($USD Billions)$34.490 $32.876 $30.756 -13.2% vs $35.414 Actual $30.756 vs ~$30.20–$30.36B
EPS – Diluted ($)$2.71 $1.14 $0.88 vs $3.55 GAAP EPS $0.88; adj EPS $0.64 vs ~$0.07–$0.43
Adjusted EPS – Diluted ($)$2.71 $1.14 $0.64 vs $3.57 Beat vs indicated ranges
MarginsQ2 2024Q3 2024Q4 2024
Net Income ($USD Millions)$880 $364 $281
Net Income Margin (%)2.55% (880/34,490) 1.11% (364/32,876) 0.91% (281/30,756)

Segment breakdown (Q4 2024 vs Q4 2023)

SegmentRevenues ($MM) Q4 2024Revenues ($MM) Q4 2023Operating Income ($MM) Q4 2024Operating Income ($MM) Q4 2023
Refining$29,334 $33,546 $437 $1,577
Renewable Diesel$522 $833 $170 $84
Ethanol$900 $1,035 $20 $190
Corporate & Eliminations— — $(279) $(298)

KPIs and operating metrics

KPIQ2 2024Q3 2024Q4 2024
Refining Throughput (kbpd)3,010 2,884 2,995
Refining Margin per Barrel ($/bbl)$11.14 $9.09 $8.44
Refining Cash Opex ($/bbl)$4.45 $4.73 $4.67
Adjusted Refining Op Income ($/bbl)$4.49 $2.14 $1.60
Renewable Diesel Sales Vol (kgal/day)3,492 3,500 (avg) 3,356
Renewable Diesel Margin ($/gal)$0.80 $0.60 $1.06
Ethanol Production (kgal/day)4,474 4,584 4,627
Ethanol Adj Op Income ($/gal)$0.25 $0.36 $0.05

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Capital Investments attributable to Valero ($MM)FY 2025N/A (Q4 call updated)$1,950 New
Refining Throughput (kbpd) – Gulf CoastQ1 2025N/A1,720–1,770 New
Refining Throughput (kbpd) – Mid-ContinentQ1 2025N/A415–435 New
Refining Throughput (kbpd) – West CoastQ1 2025N/A190–210 New
Refining Throughput (kbpd) – North AtlanticQ1 2025N/A455–475 New
Refining Cash Opex ($/bbl)Q1 2025~ $4.70 (Q3 modeling) ~$4.95 Raised
Renewable Diesel Sales Vol (B gal)FY 2025~1.2 (FY 2024 expectation) ~1.2 Maintained
Renewable Diesel Opex ($/gal)FY 2025~$0.45 (2024) ~$0.51 (incl. $0.22 noncash) Raised
Ethanol Production (M gpd)Q1 2025~4.6 (Q3 modeling) ~4.6 Maintained
Ethanol Opex ($/gal)Q1 2025~$0.40 (incl. $0.05 noncash) ~$0.41 (incl. $0.05 noncash) Slightly Raised
Net Interest Expense ($MM)Q1 2025~$140 (Q3) ~$130 Lowered
D&A ($MM)Q1 2025~$690 (Q3) ~$710 Raised
G&A ($MM)FY 2025~$975 (FY 2024) ~$985 Slightly Raised
Dividend per Share ($)Ongoing$1.07 (prior) $1.13 (Jan 2025) Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
Refining margins & captureQ2: Co-product headwinds, backwardation, seasonal RVP, fewer “opportunity feedstocks” suppressed capture . Q3: Heavy maintenance; lower profits .Margin per barrel fell to $8.44; adjusted op income/bbl to $1.60; capture improved in NA and Gulf Coast via butane blending and Maya discount .Mixed: operational optimization offsets softer cracks
Heavy sour crude & cokingQ2: Economic uplift even at tight differentials; Port Arthur coker ramp .Record heavy sour throughput; pivot from resid to heavy crude; coking economics helped .Positive
Renewable Diesel economics & policyQ2: RD margin compression; outlook tied to RIN/LCFS and BTC→PTC dynamics .Q4 margin/gal up to $1.06; one-time inventory optimization benefit; uncertainty around PTC treatment in Q1 reporting .Improving near-term; policy transition remains a wildcard
SAF executionQ3: SAF project completed in Oct .SAF operational; first sales in Nov; optimization targeting EU/UK mandates .Positive scaling
West Coast operationsQ2: Lowest margin since COVID; imports up; TMX impact to show 2H .Q4 operating loss $(140)M; Benicia maintenance; high opex/bbl .Negative
Trade flows & Atlantic BasinQ2: Middle East runs, inventory restocking; arb shifts .Q4: Diesel cargos into NY Harbor; Europe-U.S. arb flips; Dangote impact offset by closures (Lyondell/Grangemouth) .Balanced offsets
Tariffs/macro riskQ4: Potential Canada/Mexico tariffs; management planning scenarios; throughput impact could be ~10% under extreme cases .Elevated uncertainty
Regulatory/legalQ2: Chevron deference rollback implications for agency overreach/CAFE/waivers .No new legal updates in Q4 call.Neutral

Management Commentary

  • “2024 was our best year for personnel and process safety and one of our best years for environmental performance” — Lane Riggs .
  • “Our team continues to successfully execute a strategy underpinned by operational excellence, deploying capital with an uncompromising focus on returns, and honoring our commitment to stockholders” — Lane Riggs .
  • On payout sustainability: even at low margins in Q4, Valero could honor 40–50% payout without leaning on the balance sheet; at 50% for FY, cash would have built materially — Homer Bhullar .
  • On RD performance: “There was a onetime benefit with some inventory optimization at the end of the year... mostly some inventory optimization we did” — Eric Fisher .
  • On tariffs: planning for multiple scenarios; feedstock flexibility provides resilience; throughput impact could be contained — Gary Simmons/Greg Bram .

Q&A Highlights

  • Market balances: Gasoline demand steady; diesel demand modestly up; inventories below prior-year levels; margins can tighten quickly with weather events .
  • Capital allocation: Payout floor 40–50% remains credible under lower crack environments; balance sheet and cash generation support returns .
  • Heavy sour strategy: Shift from fuel oil feedstocks to heavy crude amid tight fuel oil; Port Arthur coker favors heavier slate .
  • Regional capture: NA and Gulf Coast capture benefited from butane blending and Maya discount; Mid-Con throughput/capture stronger; West Coast weaker from maintenance .
  • RD/SAF policy: BTC ended; PTC credit CI-based; management won’t book provisional PTC in Q1 without clarity; SAF optimization aimed at EU/UK markets .

Estimates Context

  • S&P Global consensus was unavailable for this analysis window (API limit). Based on secondary sources: adjusted EPS expectations ranged ~$0.07–$0.43; revenue ~$30.20–$30.36B; Valero’s adjusted EPS of $0.64 and revenue of $30.756B beat these indications, though sources differ; treat as indicative only .
  • Implication: estimate revisions likely reflect stronger-than-feared RD profitability and resilient throughput; however, core refining margins remain near mid-cycle, tempering upward revisions in EBITDA/EPS run-rate .

Key Takeaways for Investors

  • Core metrics show normalization: Q4 refining margin per barrel fell to $8.44 and adjusted refining op income/bbl to $1.60; profitability headwinds centered on West Coast and co-products; expect mid-cycle margin assumptions near term .
  • Renewable Diesel provided a notable offset, with margin/gal at $1.06 and operating income at $170M; inventory optimization was a one-time tailwind, but platform remains advantaged on waste oils and export optionality .
  • SAF capability is now live; flexibility to toggle between HBO/SAF in EU/UK markets should support margins under emerging mandates, offering structural upside vs RD .
  • Capital return durability: payout floor (40–50%) appears credible even in lower crack environments; dividend increased to $1.13; ongoing buybacks supported by operating cash flow .
  • Watch West Coast execution: maintenance and high opex drove losses; margin recovery will depend on imports, TMX impacts, and operational reliability .
  • Macro risks: potential tariffs on Canada/Mexico and sanctions noise elevate feedstock uncertainty; Valero’s Gulf Coast flexibility mitigates, but throughput could be trimmed under severe cases (~10%) .
  • Near-term trading setup: beats vs indicative estimates on both EPS and revenue coupled with dividend raise are supportive, but mixed margin backdrop and West Coast drag may cap multiple expansion until crack strength re-emerges .