Valero: Windfall Profits Lead To 14% Capital Returns
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Ricardo Fernandez3.47K FollowersFollow5ShareSavePlay(9min)CommentsSummaryValero Energy is rated a Buy, benefiting from global energy disruptions and a persistent structural deficit in US refining capacity.VLO is positioned for sustained high crack spreads, with potential for windfall profits and EBITDA exceeding $10bn through 2028.At current prices, VLO could deliver a 14% yield via dividends and buybacks, with a price target of $280 to reach a 10% yield.Risks include global demand destruction, new US refining capacity, and potential windfall profit taxes, but near-term capital returns remain compelling. Wengen Ling/E+ via Getty Images Introduction When the Iran war turned from a weekend event to a credible threat to global energy markets, I invested in Valero Energy (VLO) as a hedge (along with Venture Global (This article was written byRicardo Fernandez3.47K FollowersFollowI have more than 35 years of experience in the investment field, having worked as a sell & buy side analyst and portfolio manager for debt and equity funds. I am currently managing a high-yield Latam bond fund.My goal, as a Seeking Alpha contributor, is to provide a fundamental view and analysis of companies and funds in a streamlined version of institutional research. The operating and financial forecast, whether my own or based on consensus, drives the valuation and ultimate rating. I like numbers (financial statements) and use words to explain their meaning and potential consequences.For the most part, my selection choices reflect what I believe can offer long-term potential, and I frequently take positions in many ideas for my personal account.Analyst’s Disclosure: I/we have a beneficial long position in the shares of VLO either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.