Valero Energy (NYSE: VLO) and Phillips 66 (NYSE:PSX) are both large-cap energy companies, but which is the better stock? We will contrast the two companies based on the strength of their valuation, risk, earnings, institutional ownership, profitability, dividends and analyst recommendations.
Risk and Volatility
Valero Energy has a beta of 1.2, suggesting that its share price is 20% more volatile than the S&P 500. Comparatively, Phillips 66 has a beta of 1.24, suggesting that its share price is 24% more volatile than the S&P 500.
Institutional & Insider Ownership
81.3% of Valero Energy shares are held by institutional investors. Comparatively, 70.1% of Phillips 66 shares are held by institutional investors. 0.5% of Valero Energy shares are held by insiders. Comparatively, 0.5% of Phillips 66 shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.
This table compares Valero Energy and Phillips 66’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Valero Energy pays an annual dividend of $2.80 per share and has a dividend yield of 2.9%. Phillips 66 pays an annual dividend of $2.80 per share and has a dividend yield of 2.7%. Valero Energy pays out 60.7% of its earnings in the form of a dividend. Phillips 66 pays out 70.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Valero Energy has increased its dividend for 7 consecutive years and Phillips 66 has increased its dividend for 6 consecutive years. Valero Energy is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
This is a breakdown of recent ratings and target prices for Valero Energy and Phillips 66, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Valero Energy currently has a consensus target price of $80.93, indicating a potential downside of 15.15%. Phillips 66 has a consensus target price of $96.37, indicating a potential downside of 7.03%. Given Phillips 66’s higher possible upside, analysts clearly believe Phillips 66 is more favorable than Valero Energy.
Valuation & Earnings
This table compares Valero Energy and Phillips 66’s revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Valero Energy||$75.66 billion||0.55||$2.29 billion||$4.61||20.69|
|Phillips 66||$85.78 billion||0.62||$1.56 billion||$3.97||26.11|
Valero Energy has higher earnings, but lower revenue than Phillips 66. Valero Energy is trading at a lower price-to-earnings ratio than Phillips 66, indicating that it is currently the more affordable of the two stocks.
Valero Energy beats Phillips 66 on 11 of the 17 factors compared between the two stocks.
Valero Energy Company Profile
Valero Energy Corporation (Valero) is an independent petroleum refiner and ethanol producer. The Company’s segments include refining, ethanol and Valero Energy Partners LP (VLP). The refining segment includes its refining operations and the associated marketing activities. The ethanol segment includes its ethanol operations and the associated marketing activities, and logistics assets that support its ethanol operations. The Company owns logistics assets (crude oil pipelines, refined petroleum product pipelines, terminals, tanks, marine docks, truck rack bays and other assets) that support its refining operations. Some of these assets are owned by VLP, which is a midstream master limited partnership owned by the Company. VLP’s assets include crude oil and refined petroleum products pipeline and terminal systems in the United States Gulf Coast and the United States Mid-Continent regions. Its refineries produce conventional gasolines, premium gasolines and lubricants, among others.
Phillips 66 Company Profile
Phillips 66 is an energy manufacturing and logistics company with midstream, chemicals, refining, and marketing and specialties businesses. The Company operates through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties (M&S). The Midstream segment gathers, processes, transports and markets natural gas, and transports, stores, fractionates and markets natural gas liquids (NGLs) in the United States. The Chemicals segment consists of its equity investment in Chevron Phillips Chemical Company LLC (CPChem), which manufactures and markets petrochemicals and plastics. The Refining segment buys, sells and refines crude oil and other feedstocks at refineries in the United States and Europe. The M&S segment purchases for resale and markets refined petroleum products, such as gasolines, distillates and aviation fuels, primarily in the United States and Europe, as well as includes the manufacturing and marketing of specialty products, and power generation operations.
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