Valero Earnings: Continuation of Strong Results Supports Higher Payouts; Shares Fully Valued

Valero Energy reported third-quarter earnings that slightly exceeded market expectations on a combination of continued favorable refining market conditions and strong operations. Adjusted earnings fell modestly to $2.6 billion during the third quarter from $2.9 billion the year before. During the quarter, Valero paid out 68% of adjusted cash flow in dividends and $1.8 billion in repurchases, well above its 40%-50% annual target. We plan to update our model with the latest market conditions and fourth-quarter guidance but do not expect a material revision to our fair value estimate.