Valero Energy (VLO) Shares Surge 2.37% on Earnings Optimism, Zacks Revisions Signal Renewed Investor Confidence

Valero Energy (VLO) shares surged 2.37% on Tuesday, marking a two-day rally that lifted the stock to its highest level since September 2025, with an intraday gain of 3.36%. The recent momentum underscores renewed investor confidence in the U.S. refiner as it navigates a complex energy transition and refining margin dynamics.

Analysts highlight the October 23 earnings report as a pivotal event, with expectations of a 176.32% year-over-year jump in earnings per share to $3.15. While revenue forecasts point to a 10.17% decline to $29.53 billion, the projected earnings acceleration reflects optimism about cost efficiencies and refining operations. Full-year estimates suggest earnings of $7.95 per share and revenue of $117.35 billion, though both metrics would represent declines compared to the prior year.

Recent revisions to Zacks Consensus EPS estimates—a 10.84% increase over 30 days—signal improved near-term sentiment. However, the Zacks Rank #3 (Hold) rating indicates a neutral outlook, balancing positive revisions against valuation concerns. Valuation metrics present a mixed picture: a forward P/E of 20.45 outpaces the industry average but lags behind a DCF-derived intrinsic value of $253.96, suggesting potential undervaluation if long-term cash flow assumptions hold. Conversely, the 64.1x current P/E ratio and PEG of 1.76 imply overvaluation relative to earnings growth.

Analyst price targets have risen sharply, with Evercore ISI and Mizuho raising their targets by 37% and 14.5%, respectively. The average one-year target of $162.88 implies a modest 1% upside from current levels, though divergent views persist. Renewable energy initiatives, including ethanol production and the Diamond Green Diesel joint venture, are seen as long-term growth drivers, aligning with decarbonization trends. However, near-term costs associated with infrastructure transitions could temper profitability.

Valero’s strategic positioning in a top-quartile energy sector, coupled with its 5-year total return of 301.6%, highlights its resilience. Yet, the stock’s value score of 2/6 and recent volatility—despite a 14.6% monthly gain—underscore the risks of oil price fluctuations and regulatory pressures. As the company balances refining margin recovery with renewable investments, the October earnings report will be critical in validating growth projections and addressing valuation discrepancies.