Valero Energy’s (VLO) second quarter earnings climbed more than 39% year over year. The growth was backed by the overall improvement in the refining environment and higher feedstock discounts. Valero Energy remains enthusiastic about the third quarter and is consistently reviewing its refining portfolio and enhancing the asset base by acquiring refinery assets that enhance its operating performance.
We expect Valero’s 2011 and 2012 earnings to benefit from improving U.S. and global economies, higher refining margins, wider crude discounts, increased operating rates and continued cost saving initiatives. Therefore, we are maintaining our recommendation at Outperform.
Valero remains our favored stock in the refining space for its sound balance sheet, good liquidity and solid assets base. Our $26 price objective reflects a P/E of 6.25 on our 2011 EPS estimate.
