Shares of Valero Energy (NYSE:VLO) slumped by 10.9% in October, according to data provided by S&P Global Market Intelligence. Several factors weighed on the oil sector stock, including an analyst downgrade and its third-quarter earnings.
Valero Energy was hobbling right out of the gate after analysts from Goldman Sachs hit it with a sell rating on the first of the month. That downgrade from their prior neutral rating coincided with a price target reduction from $48 a share to $37 a share (which is right around where it ended the month). Driving the downgrade was the investment bank's cautious outlook on the refining market due to shrinking oil demand, unfavorable pricing, and other issues.
The refining market's tough conditions were on full display later in the month when Valero reported its third-quarter results. Due to lower refining margins and crude production, it posted an adjusted net loss of $472 million, or $1.16 per share -- a sharp contrast to the $642 million ($1.55 per share) in net income it reported in the year-ago period. On a more positive note, Valero's net loss wasn't quite as bad as analysts had expected. In part, that could be because management trimmed back capital spending to conserve cash.
The COVID-19 pandemic has led hundreds of millions of people to drastically reduce the amount of driving and other travel they do, which has clobbered demand for refined petroleum products. As a result, refiners like Valero have had to curtail production. Considering that newly diagnosed cases of COVID-19 are surging to fresh highs worldwide and in the U.S., and that the timeline for an effective vaccine being approved and reaching the public remains unclear, Valero's share price could remain under pressure for quite a while.