Valero Earnings: Refining Continues to Weaken, but Management Keeps Payouts Strong

Valero Energy reported second-quarter 2024 earnings that exceeded market expectations. Adjusted earnings fell to $880 million during the second quarter from $1.9 billion the year before as the refining market continued to ease toward more midcycle-like conditions from record levels in 2022. However, Valero continued its streak of payouts well above its 40%-50% annual target with $1.4 billion in dividends and repurchases, for a payout ratio of 87%. The high level is in part a result of a large working capital release not included in the calculation, but also management previously noted in times of strong market conditions, payouts will exceed its guided level, which acts more as a floor.