Around the Portfolios
Valero (NYSE: VLO)
The leading US refiner set its shares on fire Tuesday after reporting a $1 billion quarterly profit. That worked out to $1.82 per share, far above Wall Street’s consensus estimate for $1.18 a share. The stock soared 13 percent to a four-year high. And it’s marginally lower today, but the stock has now advanced 44% since we recommended it in October.
The key to Valero’s blowout results were fat refining margins that more than doubled year over year, as the company stopped importing light sweet crude in favor of the significantly cheaper domestic oil from the booming new shale fields in Texas and North Dakota. Valero plans to spend $1 billion this year on logistics to improve access to such cheap domestic crude, even as its overall capital spending slows.
That should leave more cash to be returned to shareholders beyond the recent 14 percent dividend hike, according to the analyst at Oppenheimer who boosted his price target from $40 to $55 a share.
Valero also announced plans to spin off its chain of 1,900 convenience stores. The offering is expected to take place in the second quarter of this year and to bring in $1.1 billion for the 80 percent of the new company Valero plans to float.
The stock is technically overextended, and new investors may want to wait for a better entry point. But with refining margins showing persistent strength, Oppenheimer’s price objective is likely to be hit before too long
Petrobras (NYSE: PBR A)
In contrast to US refiners, Brazil’s state-controlled oil giant and our Growth Portfolio holding has been in the investors’ doghouse for the last two years. Its share price has been halved over that span, and fell 22 percent last year. Petrobras has been plagued by diminishing output from its older offshore fields and the government’s insistence that it spend billions on new ones.
Government price controls also kept the wholesale price of gasoline level for the last seven years, forcing losses on Petrobras’ refineries. The company was finally allowed to lift them as of today, by 6.6 percent on gasoline and 5.4 percent on diesel fuel. Investors had been hoping for more, and the stock slid 4 percent on the news.
The leading US refiner set its shares on fire Tuesday after reporting a $1 billion quarterly profit. That worked out to $1.82 per share, far above Wall Street’s consensus estimate for $1.18 a share. The stock soared 13 percent to a four-year high. And it’s marginally lower today, but the stock has now advanced 44% since we recommended it in October.
The key to Valero’s blowout results were fat refining margins that more than doubled year over year, as the company stopped importing light sweet crude in favor of the significantly cheaper domestic oil from the booming new shale fields in Texas and North Dakota. Valero plans to spend $1 billion this year on logistics to improve access to such cheap domestic crude, even as its overall capital spending slows.
That should leave more cash to be returned to shareholders beyond the recent 14 percent dividend hike, according to the analyst at Oppenheimer who boosted his price target from $40 to $55 a share.
Valero also announced plans to spin off its chain of 1,900 convenience stores. The offering is expected to take place in the second quarter of this year and to bring in $1.1 billion for the 80 percent of the new company Valero plans to float.
The stock is technically overextended, and new investors may want to wait for a better entry point. But with refining margins showing persistent strength, Oppenheimer’s price objective is likely to be hit before too long
Petrobras (NYSE: PBR A)
In contrast to US refiners, Brazil’s state-controlled oil giant and our Growth Portfolio holding has been in the investors’ doghouse for the last two years. Its share price has been halved over that span, and fell 22 percent last year. Petrobras has been plagued by diminishing output from its older offshore fields and the government’s insistence that it spend billions on new ones.
Government price controls also kept the wholesale price of gasoline level for the last seven years, forcing losses on Petrobras’ refineries. The company was finally allowed to lift them as of today, by 6.6 percent on gasoline and 5.4 percent on diesel fuel. Investors had been hoping for more, and the stock slid 4 percent on the news.
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