Valero Energy Corp. (VLO, Financial) released its results for fourth-quarter and full-year 2016 on Jan. 31, reporting an earnings beat.
For the fourth quarter, Valero generated EPS of 81 cents, beating expectations  by four cents. The difference between the actual EPS and the estimated EPS generated a positive surprise of 5.20%.
For the year, Valero generated EPS of $4.94 per share, a 38.2% decline on a year-over-year basis.
The company generated $20.17 billion in revenue, a 10.3% increase on a year-over-year basis. It beat expectations by $3.29 billion.
The company said its biofuel blending costs, which mainly come from RINs, totalled $217 million for the quarter, a 38.2% increase on a year-over-year basis, and $749 million for the year, a 70.2% increase.
According to Reuters.com, Valero expects to sustain approximately the same level of biofuel blending costs in 2017 as it is obliged to adhere to the U.S. renewable fuels program.
Valero said high biofuel blending costs together with “narrower discounts for most sweet and sour crude oils and weaker gasoline margins in some regions” caused the operating income of the refining segment to drop 18.4% from $876 million in fourth-quarter 2015 to $715 million in fourth-quarter 2016, and 52.3% when the adjusted operating income is considered as a base for fourth-quarter 2015.
The operating income of the ethanol segment increased 1,069.2% on a year-over-year basis, from a loss of $13 million in fourth-quarter 2015 to $126 million in fourth-quarter 2016. Valero attributed the increase “to lower corn prices and stronger ethanol prices.”
For the quarter, the company sustained $208 million in general and administrative expenses, flat on a year-over-year basis.
The company generated more earnings from international operations than originally planned, which had a positive effect on the effective tax rate of 21% for the quarter.
Valero invested $628 million into the business during the quarter and $2 billion for the entire year. Of that, 70% was used to run and support the business while 30% went toward developing projects.
Through dividends and share buybacks, the company returned approximately $440 million to shareholders during the quarter and $2.4 billion during the year.
Valero pays dividends of $2.8 per share through quarterly payments of 70 cents.The dividend yield is 4.10%.
As of fourth-quarter 2016, the company had $4.8 billion in cash and securities that can be readily converted into cash. The total debt amounted to $8 billion, which comprises a 4.375% corporate loan of $500 million with maturity in 2026. The latter was issued by the company to repay a portion of its debt.
For 2017, Valero forecasts capital expenditures of approximately $2.7 billion. Of those expenditures, $1.1 billion is for growth and $1.6 billion is for sustaining projects
The stock closed at $65.76 per share yesterday, down $2.47 or -3.62% from the previous close.
The majority of analysts suggest to buy shares of Valero with a recommendation rating of 2.2. The average target price is $73.78, representing a 12.2% upside from the current price.
Guru Ken Fisher (Trades, Portfolio) reduced his position in Valero Energy by 6.88% during the fourth quarter.
Disclosure: I have no position in Valero Energy Corp.
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