VLO Financial Analysis

Analysis Date: 1/31/2025

Business Model

Valero generates revenue primarily through its refining operations, renewable diesel, and ethanol segments

Revenue Sources

• Refining segment (95.4% of Q4 2024 revenue)
• Renewable Diesel segment - Diamond Green Diesel (1.7% of Q4 2024 revenue)
• Ethanol segment (2.9% of Q4 2024 revenue)

Revenue Distribution by Channel

• Wholesale channel sales of refined products through terminals and rack operations

Income Statement Analysis

• Revenue decreased 13.2% YoY due to lower refining margins
• Operating income declined 77.6% YoY on weaker refining margins and higher costs
• Net income fell 76.6% YoY to $281M from $1.2B in Q4 2023

Balance Sheet Analysis

• Strong balance sheet with $4.7B cash and 17% debt-to-cap ratio
• Total debt reduced by 12.3% YoY to $8.1B

Cash Flow Analysis

• Generated $1.07B operating cash flow in Q4 2024
• Returned $601M to shareholders through dividends ($339M) and buybacks ($262M)

Capital Allocation

Valero maintains balanced capital allocation focused on maintaining operations, funding growth projects, and returning cash to shareholders. 2025 capital budget of $2B includes $1.6B for sustaining capital and $400M for growth projects. Delivered 78% payout ratio in 2024 through $4.3B in shareholder returns. Increased quarterly dividend by 6% to $1.13 per share in January 2025.

Management Commentary

2024 was our best year for personnel and process safety and one of our best years for environmental performance

Successfully started up DGD sustainable aviation fuel project in Q4 2024

Progressing $230M St. Charles FCC optimization project for completion in 2026

Refining margins remain pressured in near-term due to industry overcapacity

Overall Sentiment: Cautiously optimistic, focused on operational excellence and strategic growth projects while managing through near-term margin headwinds

Recommendation

Rating: Hold

Reason for Rating: Near-term headwinds balanced against strong long-term positioning and capital returns

Disclaimer: This analysis is based on company filings and public information. It is for informational purposes only and not financial advice. Past performance does not guarantee future results.

Generated on: 1/31/2025, 5:53:38 AM