Valero Energy Corporation
VLO · NYSE
Next quarter
Reports Oct 22, 2026, before the open.
Consensus is $15.31 EPS for Sep 2026 across 6 estimates, ranging $9.45 to $20.86.
VLO Jun 2026
- 27.05%
- +0.38%
- $9.87
- $12.54
- —
- $44.48B
Reported results
- $44.48B
- 12.30%
- $5.20B
- 11.68%
- $3.72B
- $12.62
Highlights
- Earnings beat: Adjusted EPS was $12.54 versus consensus of $9.87, a 27.05% surprise; reported EPS was $12.62.
- Quarterly surge: Revenue rose to $44.48 billion from $29.89 billion a year ago and $32.38 billion in Q1, while operating income reached $5.20 billion versus $997 million a year ago and $1.73 billion in Q1.
- Refining drove the print: Refining operating income increased to $4.47 billion from $1.27 billion, with refining margin more than doubling to $6.34 billion, or $23.62 per barrel from $12.35.
- Low-carbon recovery: Renewable Diesel operating income improved to $717 million from a $79 million loss, while Ethanol operating income rose to $318 million from $54 million.
- Strong cash generation: Operating cash flow was $5.58 billion, or $4.49 billion excluding a $706 million working-capital benefit and $389 million attributable to DGD’s other joint-venture member.
- Shareholder returns: Valero returned $2.6 billion to stockholders, equal to 59% of adjusted operating cash flow, and declared a $1.20 quarterly dividend.
- Balance-sheet flexibility: June 30 cash was $7.9 billion against $9.1 billion of debt and $2.2 billion of finance leases; net debt to capitalization was 11%.
- Project milestone: The $230 million St. Charles FCC Unit optimization project remains on track for completion and startup in Q3 2026.
Analysis
Valero’s second quarter was a sharp earnings recovery, substantially ahead of expectations and the prior-year period. Adjusted EPS of $12.54 exceeded the $9.87 consensus by 27.05%, while reported net income attributable to stockholders was $3.72 billion, or $12.62 per share, versus $714 million, or $2.28, in Q2 2025. Revenue increased 49% year over year to $44.48 billion and 37% sequentially from $32.38 billion in Q1; adjusted EPS nearly tripled from $4.22 in the prior quarter.
The defining feature was a broad-based margin expansion led by Refining. Refining operating income rose to $4.47 billion from $1.27 billion a year earlier, as margin per barrel climbed to $23.62 from $12.35 despite the Port Arthur outage and Benicia’s phased idling. Renewable Diesel swung to $717 million of operating income from a $79 million loss, supported by higher product prices and clean-fuel economics, while Ethanol increased to $318 million from $54 million. Cash conversion was also strong: adjusted operating cash flow reached $4.49 billion, supporting $2.6 billion of stockholder returns and leaving Valero with $7.9 billion of cash and 11% net debt to capitalization.
Refining margin expansion
Refining was the principal earnings engine. Operating income reached $4.47 billion, up from $1.27 billion in Q2 2025 and ahead of $1.81 billion implied by the prior quarter’s total results after accounting for the other segments. Adjusted Refining operating income was $4.44 billion, versus $1.27 billion a year earlier.
- Margins: Refining margin increased to $6.34 billion from $3.28 billion, while margin per barrel rose to $23.62 from $12.35.
- Volumes: Throughput averaged 2.95 million barrels per day, versus 2.92 million a year earlier; total yields were 2.98 million barrels per day.
- Market backdrop: Management attributed the improvement to resilient transportation-fuel demand and constrained global supply, which lifted gasoline and distillate margins. Higher feedstock costs and weaker sweet-crude differentials were partial offsets.
- Regional performance: U.S. Gulf Coast adjusted operating income was $2.89 billion, North Atlantic operating income was $742 million, and U.S. West Coast adjusted operating income was $199 million.
Renewable diesel rebound
Renewable Diesel moved from a loss-making business to a major contributor. Operating income was $717 million, compared with a $79 million loss in Q2 2025 and $139 million in Q1 2026. The improvement reflected higher renewable-diesel prices and stronger low-carbon fuel economics, partly offset by higher feedstock costs.
- Operating statistics: Renewable Diesel margin was $879 million, versus $54 million a year ago, and margin per gallon rose to $2.52 from $0.22.
- Volumes: Sales volumes averaged 3.83 million gallons per day, up from 2.73 million.
- Credits and tariffs: DGD recognized a $51 million IEEPA tariff refund claim during the quarter; management also cited clean-fuel production credits as a contributor to the year-to-date improvement.
- Outlook: Valero expects renewable diesel demand to remain strong as 2026 and 2027 EPA renewable volume obligations increase, particularly for biomass-based diesel.
Ethanol profitability
Ethanol also contributed meaningfully to the broad-based result. Operating income increased to $318 million from $54 million in Q2 2025 and $90 million in Q1 2026. The segment benefited from clean-fuel production credits, higher ethanol and co-product prices, and lower corn costs.
- Margins: Ethanol margin rose to $489 million from $217 million, while margin per gallon increased to $1.15 from $0.52.
- Production: Production volumes averaged 4.67 million gallons per day, compared with 4.58 million a year earlier.
- Near-term setup: Management expects ethanol demand to follow typical seasonal patterns in the third quarter.
Cash returns and liquidity
The earnings improvement translated into substantial cash generation and shareholder distributions. Valero’s financial position strengthened despite continued capital spending and share repurchases.
- Cash flow: Reported operating cash flow was $5.58 billion. Excluding a $706 million working-capital benefit and $389 million representing DGD’s other member’s share, adjusted operating cash flow was $4.49 billion.
- Capital spending: Capital investments were $350 million in the quarter, including $290 million of sustaining investment; investments attributable to Valero were $346 million.
- Returns: Stockholder cash returns totaled $2.6 billion, a 59% payout of adjusted operating cash flow. The company declared a $1.20 quarterly dividend, up from $1.13 a year earlier.
- Balance sheet: Valero ended June with $7.9 billion of cash, $9.1 billion of debt, $2.2 billion of finance leases, and 11% net debt to capitalization.
Portfolio and operating updates
The quarter also marked progress on portfolio changes and operational recovery. Benicia’s processing units were fully idled by the end of April, while the Port Arthur refinery returned to normal throughput during the quarter after its March fire. These issues did not prevent a strong result but remain relevant to the company’s operating profile.
- Benicia: Decommissioning and redevelopment activity moved into Corporate and Other in Q2; Valero expects to meet Northern California customer commitments through imports or alternative supply arrangements.
- Port Arthur: The March incident caused a full shutdown followed by a reduced-throughput restart in April. Valero recorded $15 million of repair costs and a $78 million insurance recovery receivable; related litigation and regulatory outcomes remain uncertain.
- St. Charles: The $230 million FCC Unit optimization project remains expected to start operations in Q3 2026 and is intended to increase production of higher-value products.
