VLO announces earnings tomorrow--before the bell, i believe (CC webcast is at 11:15 ET valero.com ). consensus is $1.94. VLO on their CC last November indicated that they had already cleared $1.15 for the month of October alone. so the consensus must assume they made an average of $0.395 per month in November and December--a 65% decline from the October runrate.
needless to say, i consider the consensus number to be ridiculous. to be sure, October was a special situation in the wake of the hurricanes and margins were especially wide. however, mgmt has indicated that while some contraction from October is to be expected, they anticipated forward margins to remain considerably wider than their previous guidance last spring.
last spring, they gave extremely conservative runrate guidance for $7 yearly earnings together with PCO. conservative in assumptions regarding margins, scale efficiencies, etc. and not including, iirc, the positive effect of some $500 million in hedges coming off at the end of last year.
i'm guessing they made at least $2.25 last Q, and will give guidance this year for north of $10--i don't consider $12 out of the question, but then i have been a rabid long since 6 and change. given that the stock has run up in recent weeks, including a fat 4.65% today ahead of earnings (i was even considering buying some calls or using -gasp- margin to add ahead of the CC, but only if we traded down today), it seems a lot of people are expecting the consensus to be blown away. myself included. (a situation which, lest we forget, can often lead to a sell-the-news aftermath.)
i normally would never consider adding to an already very overweight position based on a simple earnings call, but i have a feeling this is the last time VLO has a chance to really blow the socks off the street, in terms of forward expectations. PCO has now been consolidated and visibility even among analysts should become a little less foggy.
it remains to be seen whether the earnings upside is sufficient to maintain the current share-price momentum, but i am "cautiously optimistic" -g-. fwiw VLO is my second largest position after COS. |
