VOL. 124 | NO. 203 | Thursday, October 15, 2009
Valero Shares Fall as Analyst Downgrades Stock
The Associated Press
NEW YORK (AP) - Shares of Valero Energy Corp. fell on Wednesday as an analyst downgraded the refiner's stock, citing a potential $1 billion asset write-down and a weak outlook for the industry.
Valero's stock dropped 53 cents, or 2.8 percent, to $18.65 in midday Wednesday trading.
Soleil Securities analyst Jacques Rousseau cut his rating for the stock to "Sell" from "Buy." He also cut his price target to $17, down from a previous target of $25.
Rousseau warned that later this month, the company could announce a write-off bigger than $1 billion related to the falling value of assets at three refineries. The company could also reduce its dividend, he added.
Rousseau cut his 2009 earnings estimate to a loss of 50 cents per share, compared with a loss 5 cents per share from an earlier estimate. Analysts polled by Thomson Reuters expect, on average, a loss of 35 cents per share.
Soleil Securities also reduced its refining margin forecasts through 2010 on expectations that 2010 will see only a marginal improvement in demand. Rousseau believes 2010 refining margins should be as low as 2009 levels.
Looking ahead, Rousseau said that potential climate law legislation could significantly cut away at refiner earnings and cash flow. Both the House bill and recently released Senate bill could require refiners to purchase carbon permits, potentially doubling operating costs. The debate on these issues should continue into mid-2010, he said, and will likely result in higher energy prices and reduced demand for refined products.
Valero has a refinery in Memphis.
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