VLO · Valero Energy
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $444.71
Note written ·
Price against the kill line
14.6% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $444.71, on record since 11 November 2026. The shares are up 9.4% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $444.71, the 16 October 2026 close, which would show the shares leading the S&P 500 again. A fourth-quarter 2026 refining margin at or above the third quarter's $39.24 a barrel would also prove the call wrong.
Research onlyNot in the portfolio.
Catalyst
Key figures from the filings · Energy
Quarter to 30 September 2026, filed 28 October 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 46,098
- Revenue, change on a year (%)
- +43.3
- Gross margin (%)
- 20.4
- Operating margin (%)
- 19.7
- Net cash, cash less debt ($M)
- −1,161
- Price to earnings (×)
- 8.2
- Enterprise value to sales (×)
- 0.7
- Enterprise value to operating income (×)
- 6.1
All filed numbers
What Valero Energy reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 46,098 | +43.3 | 20.4 | 19.7 |
| first filed | 44,476 | +48.8 | 12.3 | 11.7 |
| first filed | 32,381 | +7.0 | 6.3 | 5.3 |
| first filed | 30,372 | −1.2 | 6.3 | 5.2 |
| first filed | 32,168 | −2.2 | 5.5 | 4.7 |
| first filed | 29,889 | −13.3 | 4.2 | 3.3 |
| Pre-tax income ($M) | 9,056 |
| Net income ($M) four quarters: 12,945 | 6,828 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | −7.8 |
| Operating cash flow ($M) | 15,959 |
| Capital spending ($M) four quarters to 30 September 2025, filed 23 October 2025 | 2,022 |
| Free cash flow ($M) | Not available |
| Cash and short-term investments ($M) | 9,840 |
| Debt ($M) non-current long-term debt and finance leases plus current debt | 11,001 |
| Net cash, cash less debt ($M) | −1,161 |
| Deferred revenue ($M) +32.3% on a year | 82.0 |
| Backlog, orders not yet delivered ($M) | Not reported |
| Receivables ($M) | 14,749 |
| Inventory ($M) | 7,611 |
| Shareholders' equity ($M) | 27,974 |
| Market value ($M) | 105,929 |
| Enterprise value, market value plus net debt ($M) | 107,090 |
| Enterprise value to sales (×) | 0.7 |
| Enterprise value to operating income (×) | 6.1 |
| Price to earnings (×) | 8.2 |
| Price to book value (×) | 3.8 |
| Free-cash-flow yield (%) | Not available |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 2.9% of shares outstanding sold short, 3.3 days of average trading to cover, −11.0% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $0 |
| 12 monthsfrom | $0 | $9.4M |
The thesis
Valero Energy's shares are more likely to lag the S&P 500 than lead it over the next three months. The market is pricing a fade from record third-quarter refining margins. U.S. diesel stocks started rebuilding in the week to 6 November 2026. The weekly inventory reports and the fourth-quarter report, expected in late January, settle the case.
The rating is Low because the share price stopped following strong margin data in October, and the newest supply data points toward lower margins. Valero's 22 October 2026 results release (Form 8-K) showed third-quarter adjusted earnings of $23.90 a share, against $3.66 a year earlier, on a refining margin of $39.24 per barrel of throughput. On 12 November 2026 the Energy Information Administration (EIA) reported that distillate stocks rose 4.1 million barrels to 103.3 million in the week to 6 November 2026. A Reuters poll had expected a 1 million-barrel draw, per BOE Report.
The shares rose anyway, closing at $374.95 on 12 November 2026 against $363.71 on 11 November 2026. That gain moves against the lag call for now. The close still sits below the 50-day moving average, and the week's diesel data supports the margin-fade case.
The price already reflects a peak. The 12 November 2026 close of $374.95 is 18.8% below the 52-week intraday high of $461.52, set on 14 October 2026, a few weeks before the best quarter in Valero's recent history was reported. That gap shows investors treating the third-quarter margin as the top of the cycle.
Bullish and bearish views on Valero Energy Corporation
The bull case on Valero Energy Corporation (VLO), in brief: diesel stocks remain below normal. The bear case: diesel stocks are rebuilding.
Bull case
- Diesel stocks remain below normal. Even after the build reported on 12 November 2026, distillate stocks of 103.3 million barrels follow a 3.6 million-barrel draw to 99.3 million in the week to 30 October 2026. The EIA's 4 November 2026 report put that level 13% below the five-year average, per BOE Report.
- Margins remain far above normal. Options Trading Report put the 3-2-1 crack spread near $45 a barrel on 10 November 2026, against a multi-year baseline in the mid-$30s. The 3-2-1 crack is a benchmark refining margin: three barrels of crude refined into two of gasoline and one of diesel. The same 11 November 2026 article said the EIA's November Short-Term Energy Outlook expects U.S. crack spreads to stay high through most of 2027.
- Russian refining is disrupted. Options Trading Report, citing Reuters, said on 11 November 2026 that Ukrainian strikes since late October had hit nine Russian refineries and cut Russian refining capacity by about 30%.
- Gulf Coast crude advantage. Management said on the 22 October 2026 earnings call that the Gulf Coast remains one of the most advantaged crude markets in the world and that higher freight costs add to that edge, per Benzinga. Management also reported no sign of demand destruction on the wholesale side.
- Added Houston capacity. Valero agreed on 30 October 2026 to buy LyondellBasell's former Houston refinery site for $320.5 million, per Benzinga. It plans to restart 165,000 barrels a day of light sweet crude capacity by the end of 2027.
- Consensus target sits above the price. MarketBeat listed a consensus target of $406.32 and a Moderate Buy rating on 9 November 2026, from 3 Strong Buy, 9 Buy, 8 Hold and 2 Sell ratings. TD Cowen raised its target to $400 from $375 on 22 October 2026.
Bear case
- Diesel stocks are rebuilding. The EIA reported on 12 November 2026 that distillate stocks rose 4.1 million barrels and gasoline stocks rose 1.8 million barrels to 210.8 million in the week to 6 November 2026, per BOE Report. Both builds came against expected draws in a Reuters poll.
- Refineries are running hard. Refinery utilization was 94.5% in the week to 30 October 2026 and rose another 0.7 percentage points in the week to 6 November 2026, per the EIA via BOE Report. High runs across the industry add product supply into the heating season.
- Gulf Coast margins are off the September peak. Energy News Beat, citing EIA spot prices, put the Gulf Coast 3-2-1 crack at an average of $65.68 a barrel for the fourth quarter through 14 October 2026. The average was $69.66 for the third quarter and $75.59 for September.
- Fourth-quarter runs guided flat to lower. Valero guided fourth-quarter throughput to 2.875–2.975 million barrels a day on the 22 October 2026 call, against 2.972 million in the third quarter.
- Targets are moving down. BMO Capital cut its target to $430 from $505 on 11 November 2026, per MarketScreener, three weeks after raising it to $505. Evercore ISI cut its target to $325 from $385 on 28 October 2026, per Benzinga, which is below the 12 November 2026 close.
- Russian diesel is reaching the U.S. Benzinga reported on 21 October 2026 that Russia sent its first diesel tanker to the U.S. under a Trump–Putin deal. More supply of that kind works against the diesel margins that drove the third quarter.
Price setup
Valero closed at $374.95 on 12 November 2026, up from $363.71 on 11 November 2026 and $350.71 on 10 November 2026. Over the six sessions from 5 November to 12 November 2026, closes ranged from $346.45 on 6 November 2026 to $374.95 on 12 November 2026, so the latest close is the top of that range.
On adjusted daily closes as of 12 November 2026, the 50-day moving average is $399.79 and the 200-day moving average is $292.74. The shares trade below the first and well above the second. The three-month change is 9.7%, measured from $341.67 on 14 August 2026. The 52-week closing low was $161.94 on 18 December 2025, so the shares have more than doubled in under a year.
The levels the case turns on are the 50-day average and the 6 November 2026 close. A sustained move back above $399.79 would show buyers looking past the margin fade. A close below $346.45 would extend the decline from the October high. Third-party targets frame the range: the MarketBeat consensus of $406.32 and BMO's $430 sit above the close, and Evercore ISI's $325 sits below it.
The sharpest drop of the decline came on 27 October 2026. Trefis reported that Valero fell 9.2% that day to a $387.34 close while the S&P 500 rose 0.6%, and that crude oil did not explain the move.
Catalysts ahead
- 18 November 2026: Weekly EIA petroleum status report. Shows whether the 4.1 million-barrel distillate build reported on 12 November 2026 continues from 103.3 million barrels, which would support the margin-fade case, or reverses into renewed draws.
- ~25 November 2026 (est.): Weekly EIA petroleum status report, Thanksgiving week. A second straight distillate build would point to diesel margins easing into winter; a return toward 99.3 million barrels would point to tight supply holding.
- ~28 January 2027 (est.): Fourth-quarter 2026 results. The realized refining margin against the third quarter's $39.24 a barrel shows how much of the record quarter carried through.
What would change the view
A daily close above $444.71, the 16 October 2026 close, which would show the shares leading the S&P 500 again. A fourth-quarter 2026 refining margin at or above the third quarter's $39.24 a barrel would also prove the call wrong.
What it trades with
Marathon Petroleum, Phillips 66, PBF Energy and HF Sinclair share Valero's margin drivers. On 27 October 2026, PBF fell 8.6% and Marathon 7.4% alongside Valero's 9.2% drop, per Trefis. A single refiner's move mostly reflects the group. The VanEck Oil Refiners exchange-traded fund (CRAK) tracks the group as a whole.
Crude oil is a weak guide; Trefis said crude did not explain the 27 October 2026 drop. Diesel and gasoline crack spreads, weekly EIA inventory data, Russian refinery outages, Russia–U.S. diesel trade and U.S. fuel-export policy track Valero's profits more closely.
The evidence, claim by claim (8)
- Third-quarter 2026 adjusted earnings of $23.90 a share ($6.8 billion adjusted net income) versus $3.66 a year earlier; the consensus estimate was $21.01. Valero third-quarter 2026 results release (Form 8-K); Benzinga · as of
- Third-quarter 2026 refining margin of $39.24 per barrel of throughput versus $23.62 in the second quarter of 2026 and $13.14 in the third quarter of 2025. Valero third-quarter 2026 results release (Form 8-K) · as of
- Fourth-quarter 2026 throughput guidance of 2.875–2.975 million barrels a day versus 2.972 million in the third quarter. Valero third-quarter 2026 earnings call · as of
- U.S. distillate stocks rose 4.1 million barrels to 103.3 million in the week to 6 November 2026, against a 1 million-barrel draw expected in a Reuters poll; gasoline stocks rose 1.8 million barrels to 210.8 million. EIA Weekly Petroleum Status Report, via BOE Report (Reuters) · as of
- U.S. distillate stocks fell 3.6 million barrels to 99.3 million in the week to 30 October 2026, against a 100,000-barrel expected draw; refinery utilization 94.5%. EIA Weekly Petroleum Status Report, via BOE Report · as of
- BMO Capital cut its Valero price target to $430 from $505. MarketScreener, BMO Capital note · as of
- Evercore ISI cut its Valero price target to $325 from $385. Benzinga; MarketBeat · as of
- MarketBeat consensus: Moderate Buy, target $406.32, from 3 Strong Buy, 9 Buy, 8 Hold and 2 Sell ratings. MarketBeat, 9 November 2026 · as of
Sources
- US crude stocks, gasoline and distillate inventories rise · boereport.com ·
- boereport.com ·
- MarketScreener
- Valero Energy (NYSE:VLO) Stock Price Up 2.9% - What's Next? · marketbeat.com ·
- Valero's Refining Margin Tripled. Diesel Crack Still Near $100. · optionstradingreport.com ·
- Why Did Valero Stock Fall? · trefis.com ·
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