Valero Energy: 2Q26 Earnings Preview

Research evidence excerpt

Valero Energy: 2Q26 Earnings Preview

ter, which should help Q2 2.29 9.40 6.43

the company weather any working capital volatility. We maintain our OW rating with Q3 3.67 10.17 6.75

a Dec 2026 price target of $294 (reduced from $299 prior). Q4 3.83 6.73 5.13

FY 10.69 30.54 24.40

• Thoughts on 3Q. Management is constructive on 3Q and the remainder of the Style Exposure

year, and based on current market conditions, 3Q could shape up better than 2Q.

Demand remains resilient domestically with no signs of softness. U.S.

utilization is running at robust levels, and inventory dynamics remain

supportive: the latest EIA data showed a commercial crude inventory draw of

~3.8 MMbbls, with gasoline drawing ~2.3 MMbbls while distillates built ~2.5

MMbbls. On the crude side, differentials are moving in VLO's favor, with

Middle East grades clearing the Straits and ASCI and WCS discounts widening

further, each a positive for VLO's advantaged heavy sour system, and any

additional loosening of crude supply would provide an incremental tailwind.

Management reaffirmed its view that the refining market will remain tight

through 2028, with capacity additions (e.g., Dangote and China exports) rather

than demand erosion as the swing factor. Ongoing Ukrainian strikes on Russian

refining infrastructure and Russia's move to import products from Asia are also

incrementally positive for global balances.

• Capture the key swing factor in 2Q; paper/physical dislocation weighs

across regions. One of the key talking points regarding 2Q26 is capture rates,

which we model to be well below 1Q levels across all regions. Management

flagged that the physical market diverged from the paper market in the March–

April window, echoing 2022 at the onset of the Russia-Ukraine conflict, where