Stock prices soared 170% during the year, and the refining giant handed over its explosive performance! Diesel price spreads climbed, and Valero Energy (VLO.US) quarterly net profit surged 524%

The Zhitong Finance App learned that US refining giant Valero Energy (VLO.US), whose stock price soared 170% during the year, released a performance report before the US stock market on Thursday. The energy giant's record profit for the third quarter can be described as highlighting that the limited global supply of refined oil products under the geopolitical conflict situation is being transformed into profit and cash flow advantages for US refineries. Valero Energy's revenue and adjusted earnings per share significantly exceeded market expectations. The next transaction focused on how long the high refining-level price spread for refined petroleum products such as diesel can last, and whether the company can continue to deliver cycle dividends to shareholders in the form of stronger repurchases or dividends.

According to the energy giant's performance data, it achieved revenue of 46.098 billion US dollars in the third quarter of 2026, an increase of 43.3% over the previous year. It was 32.168 billion US dollars in the same period last year, which is about 7.9% higher than MarketBeat's consolidated market forecast of 42.71 billion US dollars. The Group's operating profit increased from US$1,509 billion in the same period last year to US$9.073 billion, up 501.3% year on year; net profit to mother increased from US$1,095 billion to US$6.828 billion, up 523.6% year on year. Adjusted diluted earnings per share (EPS) reached $23.90, up 553.0% from $3.66 in the same period last year, and about 13.4% higher than LSEG's consolidated forecast of $21.07.

The refining business is the core driving force behind this round of profit jumps. The business's third-quarter operating profit reached US$8.782 billion, an increase of 445.5% over US$1.61 billion in the same period last year. Other businesses improved at the same time: the renewable diesel business changed from a loss of 28 million US dollars to a profit of 353 million US dollars in the same period last year; the operating profit of the ethanol business reached 272 million US dollars, an increase of 48.6% over the same period last year.

Profit growth also translated into cash inflows — the company's operating cash flow reached US$6.932 billion in the third quarter, up 268.5% year on year, and US$1,881 billion in the same period last year, indicating that the current refining boom has significantly enhanced the company's ability to generate cash, providing financial support for capital investment, shareholder returns, and debt repayment.

Diesel spread widens: refining assets pay off supply shortfall premiums

Supply disturbances in the Middle East and Russia are tightening the global fuel market, and the beneficiary mechanism for refining companies focuses on widening the price gap between the selling price of refined oil products and the cost of crude oil. The supply of gasoline, diesel and aviation coal is limited, making US refineries with stable raw material sources, processing capacity, and export channels more profitable elasticity.

Financial data and operating progress can be described as providing direct evidence: in the third quarter, the reference price difference between US Gulf Coast ultra-low sulphur diesel reached $72.27 per barrel, after being adjusted for renewable fuel obligation costs, only $21.05; Valero's gross profit per barrel — without deducting operating expenses and depreciation — rose from $13.14 to $39.24, nearly three times that of the same period last year.

In the same period, the daily refining capacity was 2.972 million barrels, down 3.7% from 3.087 million barrels the previous year. It was affected by factors such as the shutdown of the Benicia refinery; the adjusted operating cost per barrel rose from only $4.71 to $5.03. The increase in price spread far exceeds the increase in cost, constituting operating leverage for profit bursts. The raw materials side is also beneficial: the discount for Canadian heavy oil delivered from Houston was extended from $6.93 to $16.49 compared to Brent. Looking at the operating mechanism, the ability of complex refineries to process heavy crude oil at discounted prices and the sales capacity of high-value refined oil products have amplified profits.

The stock price rose sharply by more than 170% during the year: continuation of price spreads and cash returns in the next transaction

By the close of trading on October 21, Valero had risen by about 170% during the year, and had a cumulative increase of 12.7% in October. It temporarily fell 1.8% this week, retreating about 5.4% from the intraday high on October 14. Wells Fargo previously raised its target price from 389 US dollars to 485 US dollars on October 14, maintaining “increased holdings”, with room of about 11% compared to closing on the 21st; the bank also pointed out that investors are beginning to pay attention to the duration of the crude oil and refined oil market sentiment.

Cash allocation determines how much shareholder value this boom will eventually leave behind. The company's capital investment in the third quarter was US$432 million, up only 5.6% year on year; adjusted operating cash flow increased from US$1,642 million to US$7.253 billion, an increase of 341.7%. Shareholders' cash return accounted for 52% of it, while paying off $526 million of maturing debts. The St. Charles catalytic cracking optimization project was put into operation on schedule and on budget, increasing production capacity for high-value products such as alkylated oil and gasoline, and providing support for subsequent profits.

The key to judging the stock's future investment strategy is whether the company can continue to obtain high spreads and lock in profits through repurchases, dividends, and debt reduction until supply resumes. If production stops and refining is resumed, or high fuel prices suppress terminal demand, the cracking price spread may fall before revenue falls. Therefore, a further rise in stock prices requires continued improvement in profit expectations and the implementation of cash returns. Valuation should be combined with normal cycle profits, and recording quarterly profits cannot simply be incorporated into a normal or annualized valuation system.